Housing affordability a key factor for buyers in 2024

Housing affordability has been elevated throughout 2024 as buyers made this a top priority when buying a home.

Throughout this year, it became obvious to agents that this was the most favoured attribute for property buyers, given the constraints on borrowing capacities, according to the Real Estate Buyers Agents Association of Australia (REBAA) 2024 Market Update.

REBAA president Melinda Jennison said affordability underpinned market performance across capital cities in 2024 as the high-interest-rate environment continued to drag down borrowing capacity.

“Widespread affordability challenges, rising construction costs, as well as a higher proportion of investors and first home buyers have also driven stronger demand in these lower-value market tiers.

“While affordability challenges persisted throughout the year, with debt servicing ratios reaching record highs, continued population growth and a constrained supply of new housing have underpinned property prices.”

Ms Jennison said the Australian property market delivered an overall mixed performance across capital cities and regional areas, which was influenced by diverse local market dynamics and broader economic conditions.

“Among the capital cities, Sydney experienced relatively subdued growth, with Melbourne recording a slight annual decline in dwelling values.

“Affordability constraints and rising advertised stock levels were key factors contributing to softer conditions there, particularly in the upper quartile of these markets, with Melbourne also impacted by government policy changes impacting on property market sentiment.

“Conversely, Brisbane, Adelaide, and Perth stood out as the top-performing capitals, achieving strong annual growth rates.

“These cities benefitted from a combination of affordability, strong demand, and low inventory levels.”

The Market Update showed Hobart’s market remained largely flat, while Darwin stabilised after earlier declines, and Canberra posted modest growth.

In Sydney and Melbourne, total property listings are now well above five-year averages giving buyers more choice and reducing urgency in their decision-making.

However, in Brisbane, Adelaide, and Perth, advertised stock levels remain more than 20 per cent below the five-year average for this time of year.

“These markets continue to favour sellers, though conditions are beginning to show signs of gradual rebalancing,” Ms Jennison said.

“A potential interest cut rate next year could reinvigorate buyer demand and boost sentiment.

“While price growth may moderate, the ongoing imbalance between demand and supply is likely to sustain opportunities across both capital city and regional markets.

“Buyers and investors should closely monitor local trends to identify emerging opportunities amid varying market performances.”

REBAA Victoria state representative Matt Scafidi saidVictoria’s property market experienced notable fluctuations, influenced by various economic and policy factors in 2024.

“The introduction of increased land taxes by the Victorian government significantly impacted property owners, particularly investors.

“The land tax threshold was reduced, leading to higher tax liabilities for many, which, combined with elevated interest rates, prompted a surge in property listings as owners sought to divest.

“This trend was evident in the 28.4 per cent increase in distressed property listings over the past year, the highest in Australia, contrasting with a national decrease.”

Looking ahead to 2025, the forecasts suggest a mixed outlook for Victoria’s property market. ANZ predicts a 1.7 per cent decline in Melbourne’s house prices in 2024, followed by a 5.5 per cent rise in 2025.

Mr Scafidi said market challenges were set to persist, including new dwelling completions hitting a decade low.

“Approved dwellings are also about 15 per cent below the 10-year average, this decline in supply, coupled with strong population growth, could exert upward pressure on property prices.”

Widespread affordability challenges, rising construction costs, as well as a higher proportion of investors and first home buyers have also driven stronger demand in these lower-value market tiers