Falling Inflation, Refreshing News!
Weekly Real Estate Market Update with Leigh Martinuzzi MPG
Inflation, the invisible force shaping economies, is anticipated to take a global dip throughout 2024. The Chief Economist of AMP offers a glimpse into the crystal ball, predicting a return to a 3-5% range. The consequence? The Reserve Bank of Australia (RBA) might just pull the interest rate lever down to 3.6% by year-end, a significant drop from the current 4.35%. There are some with concerns about another rate rise, however most experts are whispering about a potential rate freeze. The RBA rate tracker suggests a mere 3% chance of a rate increase. I like those odds!
The stage is set with signs of an economic slowdown. Sluggish demand and dwindling job vacancies are the telltale signs. Australia’s Consumer Price Index (CPI) might be taking a dip, but it’s trailing behind its developed counterparts. As borders open up and shipping costs decrease, brace yourself for a potential oversupply of goods and the subsequent deflation in exports.
Now, let’s talk real estate. Despite economic headwinds, industry experts are optimistic, predicting property values to climb anywhere between 4% and 8% in 2024. Why? The eternal dance between supply and demand. Unless the housing supply skyrockets, we’ll still see those prices inching upward. The housing market remains strong, and with the RBA potentially easing back on the cash rate towards the end of the year, we may even see a mini-boom later on.
Buyer confidence is a fickle thing, but the ANZ-Roy Morgan consumer confidence index showed a promising start in January, up by 3 points to 84.8%. While it’s still below the long-term average, outright homeowners and indebted homeowners are showing signs of increased confidence. If the RBA keeps the cash rate stable, buyers might find the confidence they need to make more calculated decisions.
In a report by Leith Van Onslen from Macrobusiness, a grim picture emerges: the housing shortfall is expected to worsen in 2024. Dwelling completions are lagging behind a surging population. To give you an idea, in the 2022-23 financial year population growth was reported at 624,000 people with just 164,000 new dwelling completions. In 2024, they expect population to grow by about 500,000 people while new dwelling completions will fall closer to 150,000 homes. A clear sign of a housing supply issue moving foward. New home sales and loan approvals hit decade lows, adding uncertainty to an already complex equation. Affordability concerns might push some buyers out of the market, but properties offering value for money will still find eager takers.
As we navigate the real estate waves of 2024, it’s clear that challenges and opportunities coexist. Economic shifts, coupled with supply and demand dynamics, will influence property values and buyer behaviour. The key to success lies in staying informed, reading the market indicators, and making savvy decisions in a dynamic environment. As the year unfolds, the real estate market promises surprises, and those armed with knowledge will be best positioned to ride the waves of change.