At the start of 2023, PropTrack forecast that national home prices would fall.  In November 2023, home prices had increased by 5.5% year-to-date.

This is despite increases in interest rates over the year, which led to housing affordability sitting at its lowest level in decades.
 
Key trends shifted compared to 2022 and contributed to the stronger than anticipated price growth.
 
At the end of 2022, sales volumes were sitting at similar levels to those in late 2019, having persistently declined as official interest rates were lifted every month from May 2022 onwards.  In early 2023, there was a strong rebound in sales volumes that continued throughout the year.
 
Along with sales volumes, buyer activity increased significantly in 2023, with the number of enquiries per listing on realestate.com.au higher than a year ago throughout most of 2023.
 
The total number of properties available for sale remained at persistently low levels in 2023.  Buyers had little choice, which created significant competition.  New listing volumes on realestate.com.au did increase from the middle of the year, mostly in Sydney and Melbourne.
 
However, the lift in supply did little to moderate price growth other than slow its pace, which is a common trend we’d otherwise see in spring when more properties come to market.
 
The escalation in the cost of new home builds, due to increasing material prices and labour costs, saw demand for new housing decline.  This helped to support demand for established housing, but the lack of new supply is clearly problematic for the market over the long-term.
 
The low volume of supply for sale in certain markets, coupled with established home price rises, is likely to see buyers seek out new homes because they are unable to find and secure properties in the established market.
 
Another major factor supporting prices in 2023 was the significant demand for housing, which was fuelled by rapid population growth.  Over the 12 months to March 2023, the population of Australia increased by 563,205 persons.  For perspective, that is just shy of the population of Tasmania being added to the country in one year.
 
More up-to-date indicators from overseas arrivals and departures data show little evidence of a slowdown.  The impact of rapid population growth has largely been felt in major capital city rental markets but is also contributing more broadly to strong overall demand for housing.
 
STATE OF THE MARKET
From January to November 2023, property prices increased by 5.5%.  Capital city prices were 6.6% higher and regional prices were 2.8% higher.
 
Over the year, house prices have risen at a moderately faster pace than unit prices, with increases of 5.6% and 5%, respectively.  It should be noted that capital city house prices are rising faster (6.9%) than units (5.3%).
 
The trend is reversed in regional markets, with stronger unit price growth (4.2%) than houses (2.5%).
 
While prices have continued to rise, the rate of price growth has slowed over recent months.  This slowing has coincided with a lift in new listings on realestate.com.au.  However, the slowing has also been apparent in areas that haven’t had a significant increase in new listings.  There is a lagged impact of interest rate rises and many borrowers have shifted from fixed rates to variable rates throughout 2023, which may also be impacting on price growth.
 
Sales volumes in 2023 have been much stronger than those recorded in late 2022.  Preliminary sales volumes on realestate.com.au in November 2023 were 15.9% higher than November 2022.  Even though there has been a moderate increase in listings coming to market, we have seen a pick-up in sales, despite much higher interest rates.
 
The number of new listings coming to market was higher than it was a year ago, up 4.7% in November.
 
Despite the increase, new listings were still 2.8% lower than the November 10-year average.  The lift in new listings is largely being driven by Sydney and Melbourne, with new listings remaining well below their long-term average in other major capital cities.
 
Although there has been a lift in new listings, total listings remain historically low, affording buyers relatively little choice as they begin their property search.
 
WHAT TO EXPECT IN 2024
Looking at home prices in 2024, it’s important to consider the current market trajectory, where interest rates could head, what could happen with housing supply, and the impact of the interest rate hikes that have already occurred.
 
Last year’s forecasts were based on an assessment that interest rates had increased rapidly and that the subsequent reduction in borrowing capacities and deterioration in housing affordability would lead to fewer sales and more stock for sale, driving prices lower.
 
It makes sense that a reduction in borrowing capacity would result in lower prices but that has not come to fruition.  The market proved resilient, with few forced sales, and price growth and demand lifting in 2023.
 
After interest rates had been on hold for several months, September quarter inflation data was outside of the RBA’s tolerance.  As a result, it lifted official interest rates by a further 25 basis points in November 2023, taking the cash rate to 4.35% – the highest it has been in 12 years.
 
Despite higher interest rates reducing borrowing capacities and housing affordability, a large depreciation in prices over 2024 is still unlikely.
 
From the middle of 2024, we’ll also see the commencement of stage three tax cuts, which are most beneficial for higher income earners.  In-turn, this could lead to increased demand for higher priced housing.
 
PropTrack expect that price growth will be slower in 2024 than in 2023.  In saying that, they are anticipating persistent strong demand for housing, limited new housing construction, and an expectation that total listing volumes will remain low with uncertainty around whether new listing volumes will be as strong as they have been over the second-half of 2023.