Australia’s housing shortfall: a perfect storm driving prices higher in 2024

In Professional help by Jeff OsborneLeave a Comment

Australia's housing market is facing a perfect storm: a chronic undersupply of dwellings, a construction industry flat out and a surging population.

This potent cocktail is all but guaranteed to push house prices and rents higher in 2024 and beyond.

The Australian property market is facing a significant challenge with a rapidly increasing housing shortage, not just for 2024, but also for several years to come.

This situation, shaped by a combination of factors, is set to profoundly impact house prices and rental markets in the coming years.

Currently, builders are facing numerous challenges…

  • Soaring Material Costs: Building materials skyrocketed in price, with some materials experiencing inflation rates of up to 18% per year. While costs have come down to 8%, they remain historically high, making large-scale projects risky and expensive.
  • Trade Shortage: A shortage of skilled tradespeople further cripples the construction industry, as large infrastructure projects compete for the limited workforce.
  • Dwelling approvals have plummeted to record lows despite the surge in our population.

We can see housing supply is failing to keep pace with demand, and the gap is only widening.

Price growth inevitable: buckle up for 2024 and beyond…

With the housing shortage expected to worsen, the natural consequence is continued upward pressure on house prices and rental costs.

As supply remains constrained and demand continues to rise, affordability will become a growing concern.

It also means that some home buyers will consider buying townhouses or apartments while others will move to adjoining more affordable suburbs.

So what lies ahead…

The convergence of a decline in high-rise construction, industry challenges, and low dwelling approvals against a backdrop of population growth paints a clear picture: a deepening housing shortfall that will drive up property prices and rentals.

While the housing shortage is expected to continue in the foreseeable future, and will create challenges for some, property investors who take advantage of the current market situation will look back in a few years’ time wondering how they bought their properties so cheaply.

It looks like we’re going to have another good year for property in 2024…

Last year property prices across Australia defied expectations, rebounding in the face of continued rate hikes and closing in on record highs (even hitting new peaks in some areas).

The nation’s median home value made a full recovery last year as the overall housing shortage put upward pressure on prices and rents..

There is still a wide range of economic challenges that our housing markets will have to contend with this year. But there is also a combination of growth drivers – what many call a ‘perfect storm’ – that should lead to a period of further property price growth in 2024.

While the term ‘perfect storm’ usually refers to a highly negative scenario, in this case it’s a positive one. Especially if you are a property investor.

So, reasons property investors should feel positive about 2024…

1. A mismatch of supply vs demand. Continuously strong immigration is creating unprecedented demand for dwellings, but relatively little new building is in the pipeline.
2. A relatively strong Australian economy.
3. The nation's low unemployment rate, as well as Federal and State Government spending initiatives and infrastructure projects, will help to continue driving economic growth.
4. The security that interest rates are near their peak, if they haven't already peaked.
5. Historically low vacancy rates, skyrocketing rents, and no end in sight for the rental crisis.
6. Increasing consumer confidence.This creates a window of opportunity for those who can get into our housing markets before the crowd.
7. A return of international demand for Australian property. Foreign investors are back in the market, which is only going to help underpin property values.

Immovable economic forces are on your side…

If you think about it, property investment is as close to a game rigged in your favour as it’s possible to find.

The market is so big that neither the government nor the banks are prepared to let it fail. But more than that, every year inflation puts upward pressure on property prices.

It does the same for your rental income stream.

Yet the debt used to buy property is not indexed to inflation, it stays the same.  Meaning, over the long term, gains in a property’s value accrue to you and not your lenders.

While property markets will create significant wealth for many Australians, statistics show 50% of those who buy an investment property sell up in the first five years.

And of those who stay in the investment game, 92% never get past their first or second property.

That's because attaining wealth doesn’t just happen. It’s the result of a well-executed plan.

Planning is bringing the future into the present so you can do something about it now!

At Goreal we help you plan to get on that ladder and keep on climbing!

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