A Property Boom Is Coming. Are You Ready?

If you’re waiting for the bottom of the market, you’ve already missed it. We typically avoid recommending specific ‘buy now’ timings to avoid any appearance of bias. However, with 25 years in the property industry and experience with various market cycles, I feel it’s important to convey to our loyal clients that the current scenario is one of those exceptional moments.

I cannot overlook the evident pent-up demand and the solid property fundamentals that indicate we’re on the verge of a boom. Investing $6 million in the right house in the right area today could yield a value surpassing $7 million in the next 12-18 months. Delaying by a year might mean paying an additional $1 million or getting less for the same investment. The maths is simple.

Economists say prices will decline; should I wait and see?

Personally, I’m growing weary of the numerous forecasts predicting a downturn or even a property bust. Some so-called ‘expert economists’  have projected a 4% decline in property values in Sydney and Melbourne in 2024. Amidst conflicting headlines in newspapers, it’s no wonder people find themselves in a state of confusion.

Here are the two reasons they are wrong:

1. History tells us: In 2023, many economists foresaw a decline in property prices due to projected rising interest rates. Contrary to these expectations, national prices grew by 8.1% (Core Logic).
2. The property market is a separate economy: Property prices differ from the share market. Housing is a fundamental human need, so it will operate differently and always has.

All the key property fundamentals point towards a year of growth and we are committed to positioning our clients to maximise their property investments.

What are the fundamentals driving this boom?

• Interest rates: Despite 13 rate rises over the last 18 months, property values rose in 2023. We are now welcoming in 2024 with inflation stabilising and a potential interest rate cut later in the year. Once this rate cut comes, and we believe it will, prices will boom. If you wait until this time to buy, you will have missed out on substantial growth and potentially your opportunity to buy in.
• Supply shortage: The housing supply shortage is a result of decades of inadequate new home completions and policy decisions failing to match the pace of population growth and accommodate the increase in smaller households. Forecasts for 2024 predict a slowdown in new housing starts to approximately 155,000, marking the lowest figure since 2012.

• Population growth: The existing housing shortfall collided with robust population growth in 2023. Although the growth rate is expected to slow from the peak of last year, migration will persist at a pace that housing cannot match.

• A constrained construction sector: The construction sector is returning to normal growth rates. However, persistent trade shortages and elevated costs continue to pose challenges for homeowners and developers. 

• The tightest rental market on record: The current rental market is the tightest on record, with the rising cost of renting prompting many first-home buyers to stretch themselves to make a purchase. It is this group that is acquiring previously investor-owned properties entering the market in greater numbers.

What about the weakening economy?

Some economists are also tipping the economy to soften and distressed sales to hit the market in high numbers. While there are pockets of vulnerability (as we always say, there are markets within markets), particularly in the mortgage belt regions and areas popular with first home buyers, where borrowers typically have less home equity. However, family homes in blue-chip suburbs will not be impacted by this on a scale that would impact price growth.

My parting piece of advice.

The supply shortage will only become more evident as the year progresses and more buyers enter the market. This will bring back the FOMO (fear of missing out) mentality we observed in 2020 and 2021. My advice is to buy now before the rush; if you wait until everyone else is buying, you’ll be waiting for increased competition and, therefore, increased prices.

Contact us today for a  free 15-minute discovery call. We will share our views on the property market and discuss how we can ensure you optimise your property transactions and decisions. 

Lauren Staley

Managing Director

Infolio Property Advisors.