(Bloomberg) — Australia’s housing market is at an inflection point as the factors that boosted prices to record highs last year are now starting to fade, according to Oxford Economics, which expects 2024 to be softer for property prices.
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The company forecasts home price growth of 2.7% nationally in 2024, Maree Kilroy, senior economist at Oxford Economics Australia, wrote in a research note on Monday. That compares with an 8.1% surge in 2023, according to property consultancy CoreLogic Inc.
Read More: Australian Home-Price Growth Slows Further as Sydney Cools
Australia’s property market surprised with a recovery last year despite the central bank’s 4.25 percentage points of monetary policy tightening since May 2022. The increases were largely fueled by a lack of new housing stock and a surge in population growth.
The Reserve Bank last left interest rates at a 12-year high of 4.35% and maintains a hawkish tone as the economy and labor market show ongoing resilience.
The housing price momentum eased in recent months as rate hikes, persistent cost of living pressures, worsening affordability, rising advertised stock levels and poor consumer sentiment came together to take some heat out of the market.
Kilroy said deteriorating housing affordability will continue to play a key role in containing the pace of growth, especially for houses. Still, a significant shortage of homes is likely to persist across the country, placing a floor under prices, she added.
Australia faced a deficiency of more than 100,000 homes in 2023. That’s expected to ease slightly this year to roughly 97,000, Kilroy’s research shows.
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