Since May 2022, when the Reserve Bank of Australia (RBA) first raised interest rates and set in motion one of the most challenging periods in decades for the property development sector, the industry has been waiting for signs that stability and growth are returning.
There is finally some light at the end of the tunnel. George Bougias, Oliver Hume’s National Head of Research, forecasts that 2024 will be a year of consolidation and transition with a return to more solid and sustainable growth in 2025.
“Our bold prediction is that by the end of 2024, we would anticipate market conditions to have improved markedly, with volumes steadily returning, although still below long-term historical averages and around double current levels.”
“Once volumes start to increase, we would also expect land prices to stabilise and subsequently edge higher. Our expectations are that this might occur by sometime in the second half of 2024,” he added.
George continued, “In positive news for property buyers, inflation continues to decline and interest rates appear to have peaked. Although we will have to wait for more data this year, it increasingly appears likely that the period of rising interest rates is coming to an end. One cannot exclude the possibility of more interest rate increases but our base case is that the RBA will hold interest rates around current levels before beginning to cut rates sometime in 2024.”
The surge in construction costs in recent years also appears to be over with construction cost growth slowing from recent highs.
Julian Coppini, Oliver Hume’s Chief Executive Officer of Project Marketing, notes that the established residential property market recovery is continuing.
“The performance of the established residential property market is important to the new residential property sector, given the many direct and indirect linkages between the two.”
One of the key linkages is through prices and relative affordability. As the established market becomes more expensive, purchasing a new house in a masterplanned community, such as Windermere, becomes increasingly attractive.
A September 2023 KPMG Economics Report suggests Melbourne could outperform Sydney over the next two years with Melbourne prices rising by 12 per cent by mid-2025.
The report highlights Australia’s population growth also remains at record highs and is underpinned by strong levels of overseas immigration.
The Australian Bureau of Statistics (ABS) recently released new data showing that Australia’s population growth increased by over 624,000 people (2.4 per cent) in the year ending 30 June 2023.
ABS data highlighted net overseas migration accounted for 83 per cent of the nation’s population growth (over 518,000 people) over the period, with the natural increase in the population accounting for the remainder (over 106,000 people).
Julian added: “There is currently a record disconnect between housing demand and supply. Residential vacancy rates have fallen sharply in recent years across the nation and are either at or approaching record lows across our capital cities and several regional markets.
“Residential building approvals, commencements and other supply indicators suggest that the supply of new housing is forecast to remain below underlying requirements over the short to medium term. This will, unfortunately, further exacerbate Australia’s housing shortages.”
First-home buyers have been mostly sitting on the sidelines in recent years but are expected to gradually re-enter the market in 2024. There are tentative signs that this is already occurring in masterplanned communities, such as Windermere, partly due to the support of many parents who are helping their children.
Housing affordability is expected to remain a major challenge for first-home buyers. However, the residential development industry, especially across the nation’s greenfield growth corridors, continues to innovate to ensure that more young Australians can enter the property market and live the ‘Great Australian Dream’.
George concludes: “Our research and analysis, combined with many decades of experience and knowledge gained on the ground, give us tremendous confidence in the Melbourne property market despite recent challenges. The new residential land market’s prospects continue to improve and we are confident that, while the recovery will not happen overnight, the foundations are being laid for a more solid and sustainable 2024 and 2025.”
To find your dream abode visit the Windermere Sales Gallery at 275 Greens Road, Mambourin to discuss land and home and land package opportunities. Saturday – Wednesday 11am – 5pm.
