Underperforming Housing Market Expected to Recover
Australia’s residential property market lagged behind equities in 2024, but according to CoreLogic’s January Housing Chart Pack, the sector remains positioned for long-term growth.
Key Insights
- Housing underperformed in 2024, delivering an 8.3% total return, compared to 13.5% in 2023.
- Equities saw an 11.4% gain, benefiting from capital gains and dividend income.
- Interest rates and migration trends impacted housing values, slowing growth in key markets.
- Despite recent struggles, housing has outperformed equities in six of the past ten years.
Housing vs. Equities: A Long-Term View
CoreLogic economist Kaytlin Ezzy attributes the 2024 housing market slowdown to economic conditions, higher interest rates, and a surplus of housing stock.
“Despite uncertainty in the global and domestic economic outlook and the cost-of-living crisis, the ASX reached a series of record highs in 2024, buoyed by moderating inflation and strong banking sector performance,” Ezzy explained.
However, long-term trends favor housing, with residential real estate valued at $11.1 trillion, compared to $4.1 trillion in superannuation and $3.3 trillion in the stock exchange.
Factors Impacting Recovery
Several market shifts have slowed property value growth and rental increases:
- Higher interest rates have dampened buyer demand.
- Increased housing stock has put downward pressure on prices.
- Migration normalization and larger household sizes have contributed to easing rental growth.
Despite these challenges, Ezzy is confident in the sector’s long-term resilience. “Whether it’s housing or equities, it’s normal to see market volatility—booms and busts are part of the usual asset pricing cycle,” she said.
Future Market Trends
While short-term volatility is expected, Australia’s housing market remains a strong long-term asset. As interest rates stabilize and migration patterns shift, demand is expected to pick up, reinforcing housing’s role as a key investment class.
