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.
However, signs of softer market conditions emerged late last year, when the pace of price growth and auction clearance rates eased – and that is expected to continue.
In fact, 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 I’d 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.
You can always beat the averages.
While it’s likely property price growth will be lower in 2024 than it was last year, the good news is that if you don’t like the outlook for what property will do on a national level, you can always beat it by investing in the right property in the right location.
Now, by that I don’t mean look for the next hotspot.
I mean buying quality properties in locations that will outperform in the long term, such as gentrifying suburbs.
Property offers countless opportunities to improve your results through your own time, skills, and knowledge, so you don’t need to settle for average.
And there’s more to it than simply location. You can add value through refurbishment, or redevelopment.
Having said that, let’s look at seven factors that will likely drive property price growth this year.
7 factors that will drive further property price growth in 2024
- A mismatch of supply vs demand
Continuously strong immigration is creating unprecedented demand for dwellings, but very little new building is in the pipeline and any new construction will have to be considerably more expensive to make it financially viable.
This has created a level of ‘intrinsic equity’ in established properties that cannot be replaced at their current market value.
- A relatively strong Australian economy
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.
- The security that interest rates are near their peak, if they haven't already peaked
Over the last few years, one of the biggest risks to investors was the era of cheap debt coming to an end.
Now there’s no need to fear it because it’s already happened.
Could rates go up from here?
But will we see a further 150% increase, like we’ve lived through over the past couple of years?
I can say ‘no’ as definitively as it’s possible to say anything about the future.
As a result, if you’re buying a property and the numbers work today, it’s highly likely that they’ll continue to work for you in the future.
- Historically low vacancy rates, skyrocketing rents, and no end in sight for the rental crisis
This means that, as a property investor, your cash flow position will likely only improve over the next few years.
- Relatively low stock levels of properties for sale
I doubt we’ll see growth as strong as we enjoyed last year, with many locations experiencing double-digit rates of price growth, but the fundamental supply/demand imbalance won’t be changing any time soon.
So, you can probably pencil in price and rent increases for the foreseeable future, especially if you’ve bought in the right location.
- Increasing consumer confidence
The continual conveyor belt of negative news and concerns about the cost of living, rising interest rates, and inflation meant many Australians haven't been prepared to make large financial decisions, such as buying a home or investment property, over the last couple of years.
However, it is likely that more buyers will enter the market in 2024 as they realise inflation appears under control, interest rates have probably peaked, and the economy likely isn’t going to fall in a heap like many ‘Negative Nellies’ previously predicted.
This creates a window of opportunity for those who can get into our housing markets before the crowd.
- 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 (as with everything else).
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.
This isn’t an argument for complacency
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!
Just to make things clear, buying an investment property is NOT a strategy!
It's important to start with the end game in mind and understand what you need and what you want to achieve.
Then you have to build a plan, a strategy, to get there.
The property you eventually buy will be the physical manifestation of a whole lot of decisions that you make, and they must be made in the right order.
That's because property investment is a process, not an event.
If you’re a beginner looking for a time-tested property investment strategy or an established investor who’s stuck, or maybe you just want an objective second opinion about your situation, I suggest you allow the team at Metropole to build you a personalised, customised Strategic Property Plan.
When you have a Strategic Property Plan you’re more likely to achieve the financial freedom you desire. We’ll help you:
- Define your financial goals
- See whether your goals are realistic, especially for your timeline
- Measure your progress towards your goals and assess whether your property portfolio is working for you or whether you’re working for it
- Find ways to maximise your wealth creation through property
- Identify risks you hadn’t thought of
And the real benefit is: You’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.
Your Strategic Property Plan should contain the following components:
- An asset accumulation strategy
- A manufacturing capital growth strategy
- A rental growth strategy
- An asset protection and tax minimisation strategy
- A finance strategy including long-term debt reduction, and
- A living off your property portfolio strategy
Click here now and learn more about this service and discuss your options with us.
Image by Maximillian Conacher on Unsplash.