Preeminent Expert Reveals 2024 Housing Market Predictions
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Preeminent Expert Reveals 2024 Housing Market Predictions

Sydney and Melbourne likely to fall, Perth and Brisbane set to rise amid improved iron ore demand from China

By Bronwyn Allen
Thu, Nov 23, 2023 10:52amGrey Clock 3 min

The Australian housing market will deliver a mixed performance in 2024, with Sydney and Melbourne home values likely to fall and Brisbane and Perth prices likely to rise. That’s according to Louis Christopher, the Head of Research at SQM Research and one of Australia’s preeminent experts on property prices, who has just released his annual Housing Boom and Bust Report 2024.

Mr Christopher has outlined his base case for property prices next year based on a cash rate of between 4.1% and 5% (the Reserve Bank raised the rate to 4.35% this month), slower but still elevated annual population growth of 460,000 people or less, and the unemployment rate rising to between 4.5% and 5.5%. He also outlines what may happen in other scenarios, including a global energy crisis brought about by current events in the Middle East, and higher population growth above 500,000 people per year.

At a national level, Mr Christopher’s base case forecasts a -1% to 3% price movement across the weighted combined capital cities. He explains: “… with expected slowing employment growth and the corresponding rise in unemployment, tipped to be towards 5% by the year end 2024, this negative will more than offset another year of strong migration. The interest rate rises of 2022, 2023 and possibly 2024 will finally start to bite homeowners and would-be homebuyers alike. Distressed selling activity is expected to jump, especially in NSW where we are already starting to see a new trend upwards in that data set.”

Looking at the cities individually, Mr Christopher forecasts a fall or very weak price growth in Sydney and Melbourne next year in his base case scenario. He tips a -4% to 0% price movement for Sydney and a -3% to +1% change in Melbourne. This would follow surprisingly strong price growth in Sydney this year despite interest rates still rising throughout 2023. Sydney dwelling values have lifted by an extraordinary 10.9% in the year to 31 October, while Melbourne home values have lifted 4%, according to the latest CoreLogic data.

Mr Christopher said continuing strong population growth (albeit lower than in 2023) and housing supply constraints will limit price falls in Australia’s two biggest cities. Historically, Sydney and Melbourne attract the lion’s share of migrants, so the significant current surge in international arrivals is likely to offset the affordability challenges created by a slower economy and 13 interest rate rises since May 2022, which have curtailed borrowing power and loan serviceability.

Christopher says home values will fall the most in Canberra, down between -8% to -4%, and Hobart, down between -7% to -3%. The combination of a fall in Federal Government spending plus an expected strong increase in dwelling completions will create a softer market in Canberra. The city is one of very few in Australia recording a lift in housing supply as the city embraces apartment living for the first time in its history. Known as the Garden City, Canberra is dominated by houses on family-sized blocks, but in recent years the ACT Government has gradually allowed for higher density stock, including dual occupancies on larger blocks and apartment buildings in major residential centres such as Belconnen and Woden.

On the other side of the coin, Mr Christopher predicts 5% to 9% price growth in Perth and 4% to 8% growth in Brisbane. He says these two cities are likely to benefit from tailwinds created by a recovering Chinese economy and an anticipated lift in demand for iron ore and other commodities. “Perth and Brisbane are still very likely to record price rises based on super tight rental conditions, a better-than-expected global commodities market and minimal exposure to the financial services sector, where we believe there maybe be significant job losses,” Mr Christopher said.

The bulk of Australia’s mines are located in Western Australia and Queensland, and fly-in, fly-out workers commonly base themselves and their families in the capital cities. The iron ore price closed at US$137.50 per tonne in overnight trading – its highest level since May 2022 – and is up almost 20% over the past month, according to Trading Economics data.

This is largely due to the Chinese Government announcing new stimulus targeting infrastructure and manufacturing to counter deflationary pressures in the economy. China imports 70% of the world’s annual iron ore supply, making it the biggest consumer globally, according to Federal Government data. Top broker Citi is forecasting the iron ore price to average US$140 per tonne over the next three months due to the anticipated higher Chinese demand.

Mr Christopher said property prices in Adelaide and Darwin are anticipated to remain steady or record a minor price rise or correction. The base case forecast is a 0% to 3% price movement in Adelaide and a -3% to +1% change in Darwin next year.


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Hong Kong Takes Drastic Action to Avert Property Slump

The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

Fri, Mar 1, 2024 3 min

Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.


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