Charts that explain Australia's 2024 property market

Scott Kuru December 13, 2024 4 min read

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KEY POINTS

REA Group’s PropTrack says the Australian residential market in 2024 was characterised by rising prices and poor affordability
Divergent price growth conditions across Australia have shifted the ranking of the most expensive cities, with Melbourne now one of the more affordable capitals
PropTrack’s Chief Economist, Eleanor Creagh, predicts the Reserve Bank won’t lower interest rates until May 2025, keeping rates at their highest level in 13 years

The Chief Economist at REA Group’s PropTrack has penned a review of 2024, using charts to illustrate the performance of the residential property market.

Eleanor Creagh says property prices have kept rising across most of the country this year, though the rate of growth slowed towards the end of 2024 from the faster pace seen earlier in the year.

“Poor affordability, a surge in stock for sale, and the sustained higher interest rate environment have combined to slow down price growth,” she says.

“Meanwhile, rental prices have also risen, though tough conditions have begun to ease with vacancies lifting and the pace of rental price growth slowing.”

Capital city markets

Eleanor Creagh says Australia’s capital cities were notable during 2024 for the way their price performance diverged significantly.

PropTrack’s median home price figures show Perth (+18.74%), Adelaide (+14.64%), and Brisbane (+12.56% ) were the strongest capital city markets for annual growth.

“On the other hand, Melbourne prices have fallen for seven of the past eight months, with prices down 1.63% in the past year.”

Ms Creagh says the result of these divergent conditions in price growth means the rankings of Australia's most expensive cities have changed.

Melbourne is now the fifth most expensive capital city, dropping back from third place earlier in the year.

Meanwhile, Brisbane has bypassed Melbourne and Canberra and is now Australia’s second most expensive city after Sydney.

While home price growth has slowed towards the end of 2024, Eleanor Creagh says buyers “have been active and national sales volumes in the 48 weeks of 2024 to date have well outpaced (+9.3%) the same period to date in 2023.

“However, as momentum has slowed, sales volumes have leveled off.”

Nevertheless, “prices are still at record levels in most capital city markets,” she says.

Population Growth

PropTrack’s Eleanor Creagh says the resilience in the housing market is partly due to the strength in housing demand.

This has been bolstered by strong population growth.

Ms Creagh says net migration to Australia remains “elevated, but below the record high levels seen in 2023.

“Smaller household sizes, tight rental markets, resilient labour market conditions, and wage growth have also played a part in bolstering housing demand,” she says, while the “home equity gains of recent years have incentivised upgrade activity.”

Slow construction

Another factor keeping the housing market tight is the lack of new supply.

“Due to industry challenges like higher build costs and labour shortages, the supply side of the housing market has been unable to respond to the strength in demand, exacerbating a pre-existing chronic shortage of housing,” Eleanor Creagh says.

“As a result, completions per capita are at historic low levels, and the supply shortages have underpinned home prices in the two and a half years since interest rates began to rise.”

PropTrack data shows annual housing completions per capita are at their lowest levels in nearly 40 years at around 6.3 new homes.

“Construction capacity constraints have continued in 2024, and most markets have completed fewer new homes than expected.”

While Ms Creagh says that building approvals have finally started to move in a positive direction, with total approvals rising 4.4% in October to the second highest level in two years and are up 6.1% year-on-year, they remain below longer-term average levels.

Rents

DEC13-Rents

“Conditions in the rental market have also begun to improve in 2024, and the pace of rental price growth has slowed through the year, and vacancies have eased,” PropTrack’s Chief Economist says.

However, Eleanor Creagh points out that “rental markets are still tight, and many will remain extremely challenged by poor rental affordability after the significant rental price increase of recent years.”

The outlook for 2025

PropTrack’s Eleanor Creagh says inflation has continued to move lower in 2024 “but not by enough to change the RBA's stance on policy.”

At this stage, she believes the central bank is unlikely to start cutting rates until May 2025. Nevertheless, she believes national home prices will keep increasing even though growth will continue to moderate.

However, it’s a different story once official interest rates start coming down from their 13-year high of 4.35%.

“Once interest rates begin to fall next year, affordability will ease slightly, bolstering confidence and fuelling activity among potential buyers.

“As interest rates move lower in the second half of 2025, rebooting demand, prices are likely to regain traction supported by a more favourable outlook on inflation and interest rates boosting sentiment,” Ms Creagh says.