What 2023 Means for 2024

What 2023 Means for 2024

It’s the economy, stupid.

This was Bill Clinton’s (42nd President of the United States) key sound bite when he was running for office in 1992. Back then the US like us had high interest rates, but it was the effects of economic recession that really drove the property market downturn.

Interest rates limit how much buyers can borrow, but that effect is unevenly distributed. The higher your loan ratio to property value, the greater the effect of a change in interest rates. That means first-home buyers are most affected, and Ryde units as a market are greatly affected by first-home buyers.

But it’s the economy that really controls how much money people earn. That’s where we will see the most significant changes as businesses pull back or, even worse, close down. That is already changing people’s earnings, and across Sydney, we are starting to see what auctioneers call a patchy market. Expect to see fewer headlines about real estate price resilience and more about the pain of households trying to make ends meet.

These economic changes won’t make prices drop quickly. Still, like any significant influence, it will be pervasive and slow to reverse. If they ease off interest rates or leave them where they are, the effect of previous rises have a lot longer to go before they have fully worked their way through.

Unit prices will remain soft, house prices will start to soften as well.


The dead cat bounce will finish bouncing.

Over 2023, we saw the dead cat bounce. Even though it was tougher getting a loan, prices held up. That’s because there were a lot less people putting their property up for sale.  In fact, numbers of listings were down about 20% compared to the five-year average. With low supply, prices held or even increased, but there is only so long that people can hang on to property before they decide it’s not worth the pain of struggling.

In late 2023, we saw more people deciding to downsize their debts. That meant selling property to pay off loans. Volumes of property coming on the market have been increasing since spring. That increase in volume will lower prices in 2024 as the market evens out increased supply with more cautious demand.


Rent growth will normalise.

It’s not that rent growth will plateau or fall; it won’t. But we won’t see growth of 20% again either.

Last year’s rent rises were driven by market correction after Covid lockdowns. Now, rents are increasing because more landlords are leaving the market. Mortgage repayments have risen far more than rent payments. The focus and alarm in the press and politics was to help tenants. The group that governments should have been helping were landlords, who are the biggest suppliers of rental property. The political reaction was akin to make it more costly for dairy farmers to produce milk and then tell everyone that milk prices and lack of supply were because of greedy cows.

Rent growth over the coming year will still be up around 10%. That is locked in, but if we continue to lose investment property, that rent growth will continue for longer. Macquarie Bank has told us they are seeing falls of 10% in the number of investment properties in agent’s rent rolls. In some states like Queensland and Victoria, it’s worse.

The size of rent increases is limited by how quickly people can adjust their spending. The longer it takes to accommodate the increase, the longer it takes for the market to stabilise. Expect rent growth of 10% per annum for several years. And if as a landlord, don’t be surprised by tighter controls on leasing property.


A, B and C grade strata plans.

Good strata plans and the not-so-good have always been around. The significant change with selling strata properties is that every buyer now expects a strata report to be available. Their willingness to dismiss a property that has high strata levies, or negative fund balances or works that might require a special levy is quick and final.

Many committees of strata plans have tried to keep levies as low as possible, often avoiding work that needs to be done or letting their administrative fund run negative. They have saved $1000 per year per lot owner but lost $20,000 per lot owner in property value because buyers are less willing to pay market value for a unit in a problem block.

Like most things avoided, work costing $30,000 today will cost $40,000 if left for a few years.

With a more challenging sales market, the market will be much tougher on poorly run strata blocks. Investors would be wise to get involved with Strata and push to get maintenance up-to-date if they are considering selling in the next couple of years.

As a lot owner, the law is on your side regardless of what the committee wants to avoid.

It’s your property’s value, protect it.


Stephen Jackson