What will impact property prices in 2024?

January 19, 2024

The past year has been a rollercoaster for many of the underlying drivers of property return that impact both capital growth and rental return. Whilst some supply side and demand side drivers have continued their trajectory, others have changed substantially due to government policies. On top of this, there are some global factors that also impact the eventual property price today and into the future. We will look at some of the main factors and their expected impact on property investors’ profits.

Supply side, inflation-push drivers

Cost of building

Shortage of supplies push the cost of building a new house higher over time usually in a smoother, less volatile way than ‘demand side’ drivers. Australia is already chronically short of housing. Some of the main components of supply are land, materials, skilled labour, permits/approvals and holding costs.

Overall building and construction costs are easing, availability and delivery times are improving too. Much of the materials used in construction are produced locally. However, some key items e.g. windows, some framing timber, fixtures and are sourced from overseas – and the historically weak Australian dollar has kept these prices high.

However, for investors, supply shortage is good news. Property prices can’t fall because the cost of building continues to gradually increase all over the world and will continue to grow. So, the sooner investors get in, the better it is. It removes the fear of prices dropping.

Shortage of land

Even though Australia has vast amounts of land, most of it is uninhabitable with no-one wanting to live there. Where Australians want to live is close to the coast in major cities. These capital cities have very little land available for new development, hence continually driving up its price.

This is particularly relevant for Melbourne where land is much cheaper than Sydney, and closer to jobs and defined ‘mini’ CBDs called ‘key activity centres’ – creating demand by offering much better value for own-stay buyers and investors, and better yields too when houses are constructed on the plots of land.

Demand side, inflation-pull drivers

Demand side drivers, usually receive the most attention in the media outlets as they can dramatically influence the price of Australian property either up or down. As this is where most Australians store their wealth (and for own-stay property owners who represent approx. 80% of all property ownership, they are emotionally concerned about their homes’ value). Demand side drivers usually result in a ‘spikier’ property price growth than smoother supply side driver growth. There are many demand side components including migration, interest rates, RBA policy, the strength of the AUD, government policies, rents, etc.

Interest rates

One of the most prominent drivers has been interest rates, and traditionally when interest rates have been high, this has forced the property market to be subdued with low growth due to lower borrowing and serviceability for purchasers. However, even in the face of continual interest rate rises, the property market has continued to grow. This has been due to the historic low levels of the amount of stock available. The RBA, the Federal Treasurer, and most economists all agree that our inflation has peaked, and although its is a still above the RBA’s mandated range, they are unlikely to raise interest rates any further. The market and most economists are expecting interest rate cuts by the 3rd Quarter of 2024 (some are expecting it mid-year). This will substantially increase buyer confidence, and hence increase demand as more people can borrow more, – this will strongly fuel property price growth.


As highly in-demand country, Australia has seen immigration hit all-time highs, well beyond pre-COVID border lockdown levels. These immigrants are predominantly coming for jobs or education and wish to be close to family/friends/community – this favours the capital cities, and mainly Melbourne.

The ‘great spreading out’

Another trend that is continuing has been called the ‘great spreading out’ which started during COVID lockdown as people moved out of share-house to live alone or with their partner enabled by the working from home (WFH) opportunities. As both the immigrants and WFH employees all need somewhere to live, in the already undersupplied Australian property market, this has led to historic high rents & rental growth. This high rent return and rental growth, which is likely to continue, is making rental property more valuable, so investors are competing to buy them at ever increasing prices.

Government initiatives

The federal government announced a policy to build 1.2 million houses over the next 5 years, many of the states also have their own policies to build additional houses on top of that total. Federal & state construction targets have already been missed for 2023, so they are likely to ramp up from 2024 onwards competing for land, construction materials, skilled labour. This will be amidst already major infrastructure spending to develop regional areas away from the CBD. This alone, is expected to be one of the biggest drivers of property growth for the next few years.


The coming year should see strong price growth in Australian property due to both supply side and demand side drivers. With the overall relative underlying strength and stability of the Australian economy, coupled with historically low AUD and greater certainty that inflation and interest rates have peaked, has led to early investors who’ve seen this cycle before entering the market already. Once the majority feel confident that interest rates are on their way down, and especially once banks start lowering their additional buffer rate, then demand will really start to pick up. In addition, once people start seeing less and less stock, in fear of missing out will compete aggressively in the knowledge that the underlying cost of replacement with a new house is underwriting their prices. The combination of easing interest rates and continued rental growth should allow investors to be able to hang onto their property more easily for long term for capital growth, – which is where the real profit is in Australian residential investment property.


Disclaimer: This article is for general information purposes only and should not be taken as advice. Always seek professional advice from suitably qualified professionals familiar with your situation and goals.


Steven Molnar is Head of Research and Education for Resimax group. With over 25+ years in property and finance in Australia and internationally, he brings a unique perspective to his blogs with interesting property insights.