Will interest rates be the biggest influence on housing this year?

Interest rates are expected to exert the most significant influence on the Australian housing market in 2024, according to 71 per cent of real estate professionals.

The findings came in a new survey conducted by property data and analytics provider CoreLogic, ‘Decoding 2024: Real estate’s trends and goals revealed’.

After collating the responses from 1,400 real estate professionals surveyed between December 2023 and January 2024, CoreLogic found that fluctuations in interest rates were the largest influencing factor impacting the state of the property market in 2024.

Of the respondents, 59 per cent said they strongly believed that rising interest rates would have the most substantial impact, while 12 per cent anticipated that falling rates would influence the market to some degree. Currently, the market is generally expecting rates to drop this year – with the big four bank economists all suggesting that we are currently at the peak of the rate-hiking cycle.

At the local level, challenges such as low housing stock (41 per cent) and concerns about high-interest rates and inflation (38 per cent) were also identified as significant stressors on real estate agencies for the year ahead.

Despite these concerns, there was generally a positive sentiment towards the overall economy in 2024 – with 57 per cent of the respondents optimistic about the economic outlook of the country.

A similar number (59 per cent) anticipated a rise in home values during the year.

Nearly half (46 per cent) of respondents said they expect house prices to rise by between 1 and 5 per cent this year, with a further 13 per cent expecting an increase of more than 5 per cent.

A quarter (25 per cent) reportedly think that house prices will stay steady, while 16 per cent are predicting house price falls in 2024, according to the survey.

Noting the findings, Eliza Owen, CoreLogic’s head of residential research Australia, emphasised that the survey results align with the current forecasts of major banks, indicating that the housing market is expected to grow at a slower rate than the 8.1 per cent observed in CoreLogic’s Home Value Index in 2023.

“Growth in housing demand is expected to slow amid higher cost-of-living pressures, a higher tax take from bracket creep, and high-interest rates. This means less savings to put toward housing purchases,” she said, highlighting that recent ABS data has shown that the household savings ratio had fallen to its lowest level since 2007.

“Consumer sentiment remained very low at the start of 2024, which can also signal households being hesitant to make high-cost, high-commitment decisions.”

Ms Owen also highlighted that consumer sentiment remained low at the start of 2024, signalling household hesitancy towards high-cost, high-commitment decisions.

However, despite some of the headwinds for market demand, growth is still expected to be positive throughout 2024, she reflected.

“Ongoing constraints in the construction sector are likely to keep a floor under home values, with the number of completions trending lower throughout 2023,” she said.

“There remains a strong mismatch in the supply and demand of dwellings across Australia, and anything that makes buying more accessible, such as a reduction in interest rates, would likely boost buyer numbers. With inflation currently trending just below RBA forecasts, the case for a cash rate reduction is firming up in 2024.”

CoreLogic’s general manager – real estate solutions Dirk Miller added: “Our survey respondents indicate confidence about house price increases and 2024 economic growth stimulating business in the long run, despite having strong concerns about interest rate fluctuations shaping this year’s market.

“The results also found low levels of stock and deepening customer relationships are also weighing on their minds. This will make smart prospecting, maximising the untapped potential of their databases and building a stronger brand pivotal to success through 2024 and beyond.”

[Related: House prices will continue to grow in 2024, economists forecast]