What’s ahead for the Australian property market

What’s ahead for the Australian property market for the balance of 2023 and into 2024?

Over the last year, we experienced twelve interest rate rises, stubbornly high inflation, wage decisions that risked a wage-price spiral, and new economic data suggesting Australia’s economic growth has all but come to a standstill.

You can understand why some commentators became increasingly worried about the prospect of a recession.

Yet housing markets remain stubbornly resilient with rising house prices and skyrocketing rents.

And our economy kept bounding along creating jobs for everyone who wanted one

But with the likelihood that high interest-rate and inflation will keep eating away at the average Australian's household budget for some time, therefore making property less affordable, the question I hear many property investors asking is"What is going to cause property values to increase moving forward?”

Now this is nothing new.

After the boom of the late 1980's the media was full of messages that property values just couldn't get any higher and parents were worried that their children (today's Baby Boomers) would never be able to afford to buy a home - see how wrong this was.

In the early 2000's we experienced a property boom that left many commentators wondering: "What on earth could make property values get any higher?"

After the property boom of 2014-16, the media was full of messages about how unaffordable properties were and prices just couldn't get any higher - but after a lull and a couple of false starts we had a once-in-a-generation property boom in 2020-21.


Note: Of course, Australia is a big country and there are many remote locations where properties remain very affordable - the problem is that no one really wants to live there.

In general, we tend to want to live in many of the same choice locations in our big capital cities.

But if prices are expensive there, what will cause the value of well-located properties to keep rising?

I believe demographics (such as population growth, family formation, how we want to live, and where we want to live) as well as the wealth of the nation will be the main long-term drivers of our property market and will be much more important than the short-term fluctuations created by interest-rate rises, inflation or government intervention.

And while forecasting is difficult, especially about the future, history is instructive so let’s look at what happened in the past, even though that’s only part of the way to look at the future of Australian property.

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What’s ahead for the Australian property market 
Jason Gwerder
Wednesday, 23 August 2023

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