As we roll further into 2024, we can see the trends lining up so for those of you who plan your purchases at the start of the year, see below for the top ten influences we believe will impact the market in 2024.
Market pressure and price ripples
Anyone with a calculator seems to be an expert about what the market will do this year – and 99% are wrong. That’s because they look at information that is too high level to see any real trends until the trend has already occurred.
in 2024 we’ll continue to see tight supply and solid buyer demand, so follow the ‘ripple effect’ if you’re chasing areas with good price growth. This means buy one or two suburbs away from a main centre so you can purchase at a lower price, then let capital growth flow your way.
When it comes to market movements and suburb performance remember every suburb / property type is a market in itself so ensure you monitor activity specifically for the property type you need (or want). For example, three bedroom houses v four bedroom houses.
For best results, pay close attention to each property’s characteristics because this year – more than any other year – property with ‘potential’ will deliver the pot of gold which is the backdrop for our next big trend – small lot developments.
Small lot developments
The writing has been on the wall for years, but governments right around Australia have now started to increase their focus on alleviating the housing supply problem. In 2024, expect to see more announcements about relaxation to heritage areas, expansion of density boundaries, and more farming / rural land changing to residential zoning.
With councils re-zoning to unlock supply and keep pace with population increases, all property owners should be checking their zoning regulations. Yes, even those of you who have units – particularly low rise constructions on large blocks of land. If you’ve checked your properties and you’re not sure you can do anything, give us a call as we can review your property and provide an outline of what can (or can’t) be achieved. Definitely any future purchases should include consideration of local zoning requirements even if you’re not planning to take any action in the short term.
Renovations
Will the renovation option ever get old? Despite the spike in costs, I can’t ever see this happening so we will just see this move in waves as suburbs age. As a buyers’ advocate I definitely see two distinct buying groups – one who is repelled by even the smallest amount of work, and one that can’t wait to get their hands on a renovation project.
The Housing Industry Association economists have done some work on figures – they point to suburbs that are around 30 to 35 years of age as the sweet spot for properties that will deliver great results after renovation projects. Opportunities are Australia-wide. With such a tight hold on housing supply, the renovator group should be able to buy and sell with solid results. There’s more buyers for completed renovations, so properties requiring renovation in 2024 will be at the lower end of a suburb’s price bracket . . unless that property has been rezoned of course.
Upgraders
The ‘upgrader’ group (ready to move from their first or second property) started to make their move in 2023 though many held back over the past few years as they watched from the sidelines while prices smashed records. Sure, they made significant gains, but they’re currently growing out of or are bored with their existing properties and looking to utilize some of their property profits to change locations. Despite the interest rate changes, there’s still attractive rates for home loans so expect the broader group of upgraders to finally get moving . . . literally. Renovators – please take note . . .here’s your market. This will impact price points anywhere from $900,000 and generally up to $2,000,000 range, Australia-wide. Some clients in this band are selling their principal residence and moving to more ‘cost effective’ locations, then purchasing ‘a few’ properties instead of just one – but then they become ‘changers’ not upgraders.
The laggards
Look to the areas that didn’t have double digit price increases over the past two years as these will now receive attention. The general buy-in price for many first time buyers is the $600,000 to $750,000 price range, so well located properties in this price band will continue to be popular. This will mean Brisbane will get more action and will be pushed along by Government spending in preparation of the Olympic Games in 2032. Also Perth, Bathurst, the Central Coast of NSW, Ballarat, Geelong. We used to love Newcastle and Wollongong for this price point but these areas have now become more attractive to upgraders as prices are now generally over the $750,000+ range.
You’ll hear people point to Hobart, Canberra and Adelaide as ‘cash flow buys’ but unless you really want to live there don’t expect good price performance from these areas in 2024 (and maybe never). Caution should be used with Hobart as prices have hit the wall – it had a good run during Covid but was never going to continue the upward trend – Hobart should be thought of in the same category as big regional towns (not regional cities).
Canberra is another amber light – firstly, it’s just like a mining town as they have one major employer . . the Federal government. In 2023, the government started pulling back on spending so we’re seeing prices dip and expect this to continue in 2024. Secondly, we’re not fans because it’s leasehold land – not freehold like most other areas of the country so the goal of ‘eternal’ income isn’t as assured.
As for Adelaide – it’s a beautiful place to visit but families just don’t flourish there due to the limited employment opportunities. Those families that start in the area see their children grow up and leave for the other (more exciting) capital cities. While the purchase prices may be reasonable, there’s better options in the other States.. And let’s not even mention Darwin – once again beautiful but capital growth is a long way away.
Infrastructure
Follow the good projects. This is another eternal trend / positive influence (as per renovations above). Of course, timing is everything as different property will perform at different stages of infrastructure completion. Rail projects are quite good to track (pun intended) but be really careful of useless spur lines that finish in greenfield areas (hello Springfield, Qld), though the Qld government is now working on linking the Springfield line through to Ipswich.
Excitement is really starting to build for the Western Sydney (Nancy-Bird Walton) Airport which takes off (ha!) in 2026. Depending on what you want to buy the main issue is to check the flight path, but otherwise expect prices to continue to rise across the broader Western Sydney base. You would have to expect Councils in this area to succumb to State Government pressure to adjust their zoning and allow more housing, so we’re keeping a watchful eye on this.
Commercial property
For the focused property investor who actually likes to receive immediate positive returns on their investment, we are seeing an increased interest in commercial property. This trend is underpinned by a combination of other trends – a trail after increased residential activity, and new suburbs / areas impacted by Federal and State infrastructure spending. However, watch out for crashing retail prices in some CBDs as the ‘work from home’ trend is pretty much entrenched, for the next 12 months at least. On the flipside this means opportunities for high streets in larger suburbs just outside the city.
Back to cash
If you’re buying property for the purpose of creating continuous income then your purchase should be cash flow positive. After the constraints of Covid, rents have spiked delivering an unexpected increase in positive cash flow options. Changes in zoning have meant an increase in the use of granny flats and – as previewed above – there will be a broader range of properties where this type of housing will be approved and even encouraged by local Councils.
If you have one or a few investment properties already, consider the feasibility of adding a granny flat to your property as the cost – approximately $150,000 to $180,000 – is much lower than a full knock down rebuild. Always consider the full range of options, costs and longer term impacts before taking any action.
Micro apartments
This is the new term for the old ‘boarding house’ approach. There’s considerable variety in how this strategy can play out depending on the property, your budget and your goals. This includes converting an existing house to facilitate shared kitchens and other living areas, through to true ‘apartments’ ranging in size from 12 to 25 square metres. Note the rents include all services such as electricity and water, appliances and often crockery (plates etc), however the returns can be extremely good. The added benefit is providing affordable housing to those who will really appreciate access to well located affordable rentals. Like all building forms, each council will have standards that need to be observed and there is specific legislation for owners to know and understand. The one consideration that is relevant in most Council areas is that micros cannot be split up and sold separately like a block of town houses, but this may change in the future.
Portfolio balance
With markets on the move and the banks tightening lending practices, the importance of building a balanced portfolio is emerging as a significant issue. Balanced portfolios allow you to continue to buy when the time is right, and hold on to your property when the market tightens. The best portfolios contain a diverse mix of property types and should include at least one or two properties that can be either renovated or developed for further capital uplift. But it’s not only about what you buy, it’s also about the way the property is purchased. This is what we specialize in at The Property Frontline – building portfolios that deliver lifetime income. Currently we’re mostly focused on building portfolios that include Australian and New Zealand property, but we should be organized for purchases in at least four other countries soon. If you would like to know how to build or balance a profitable portfolio book in for a Property Clarity Call here.
In summary
2024 will no doubt be another year to remember, but for now it’s all ahead of us. I hope the trends outlined above will provide you with a good planning framework, but there’s plenty more trends on the horizon (including smart homes and autonomous vehicles to name a few). If you have one (or more) trend you would like to suggest, please send them on through to us at debra@propertyfrontline.com.au or comment on our social media pages.
About the author
Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline. She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.
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Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.
