In a year marked by high interest rates, persistent inflation, and cautious consumer sentiment, national house prices rose by 7.7%, while national unit prices increased by 6.1% between March 2023 and March 2024.

Households have managed to cope with the 4-percentage point rise in mortgage rates and the impact of the fixed-rate mortgage cliff, thanks in part to a strong Labor market and relatively low unemployment. Meanwhile, rental prices have been climbing as a result of strong population growth and a constrained housing supply, putting additional pressure on the rental market.

Rental prices saw an annual increase of 7.8%, the highest growth since the March 2009 quarter. This surge reflects the ongoing low vacancy rates and tight rental conditions. Looking ahead, we project annual rent increases of around 4–5% over the next two years, based on forecasts for new dwelling completions and population growth projections from the Treasury.

We expect the declining trend in housing approvals to reverse, driven by strong population growth and a rebound in house prices. However, due to the time required for approvals to translate into actual housing completions, we anticipate limited impact on new housing supply in the near term.

In 2024, price growth is expected to be slower than in 2023, as the ongoing high interest rates will likely slow the market, offsetting some of the previous gains. Interest rates will remain the key factor influencing house prices in 2025. The Reserve Bank of Australia is expected to cut rates in late 2024, which should positively affect house prices by improving credit availability and boosting buyer confidence.

Looking ahead, the government is seeking to strike a balance between natural population growth and migration by tightening visa regulations for migrant workers and international students. High immigration levels have put significant strain on the housing market. The government projects that without these new measures, migration levels would have remained elevated, reaching 440,000 in FY24 and 305,000 in FY25.

Rent inflation has continued to rise, increasing by around 7.8% in Q1 2024 after a 7.3% rise in Q4 2023. Rent inflation remains a significant contributor to the consumer price index in the March quarter of 2024.