Our year in review and looking towards the real estate market in 2024
It has been a tale of two halves for the residential property market throughout the 2023 calendar year.
In the first half of the year, we saw a lower volume of listings coming off the back of a challenging 2022. These low volumes were due to several contributing factors, but in particular the continual rise of interest rates (13 increases in the 18-months between May 2023 and November 2023*), and the ongoing dampening effect that this was having on borrowing capacity and consumer confidence.
Despite these challenges, prices held well, and some pockets of Melbourne saw medians increase. This was largely due to the low level of supply of properties coming onto the market and an increasing number of buyers becoming active within the market. The upper end of the market proved more resilient, thanks to less macro-economic sensitivity coupled with a shortage of available homes in Melbourne’s most sought-after suburbs.
During the second half of the year, the marketplace recognised that inflation was tempering and therefore the interest rate cycle was close to peaking. This in turn led to a relatively strong winter period, and consequently quite a buoyant spring and early summer market. After a welcome pause of rate rises over 4 consecutive months from July to October, the RBA increased rates again in November, opting for a momentary foot on the break to ensure inflation continues to fall. We don’t anticipate this latest rise to have a significant effect on the improving health of the market. However, if there is a further rate rise in early 2024, this will dent affordability and may impact buyer demand slightly going into 2024.
It is an interesting period for the rental market. On the one hand, rents have increased significantly, and vacancy rates remain at an all-time low (2.4% for the month of October in metropolitan Melbourne^) which has been a positive for our more than 20,000 investor clients. However, low levels of available housing continue to have an impact and whilst some measures are being taken to improve this situation, the severe housing shortages is causing significant pressure on renters across the state and country. We are starting to see some more activity in new housing development, although it will be mid-to-late 2024 before we see a material level of new stock coming to market. We continue to advocate for government action and support in this area for the benefit of our community.
The Jellis Craig Foundation continues to be central to the culture of our business and we are proud to be celebrating 10 years of the Foundation in early 2024. I look forward to seeing our partnerships with The Big Umbrella and The Resilience Project continue to grow and supporting their initiatives over the next 12 months and beyond.
The picture we are witnessing and experiencing is a very healthy recovery in the property market, with the underlying demand representing a solid and stable environment, albeit not the boom market of late 2021. I foresee positive signs for the residential property market in 2024. We expect stronger conditions to continue as confidence climbs off the back of very strong employment and immigration numbers, as well as an overall shortage of new housing supply.
Thank you to our clients for your trust and support, I wish you all the very best for a wonderful festive season and look forward to working with you throughout the course of 2024.
Source: *Reserve Bank of Australia, ^REIV