Why 2024 could be the WORST time to buy property

Why 2024 could be the WORST time to buy property

  04 Jan 2024

Key takeaways

2024 will be a very different property market to last year and the year before, but there is really no “best” time or “worst” time to buy property.

Property investment is a process, not just an event.

So rather than just talking about going out and buying a property in 2024, the right time for you to consider investing is when you have all your ducks in a row.

For some of you who are reading this right now, 2024 will absolutely be the worst possible time you could consider buying a property.

For others their is a window of opportunity before the market resets and the next cycle begins.

Savvy property investors are likely to re-enter the market in 2024 after a year in which many sat on the sidelines because of fast-rising interest rates and high prices.

It’s a bold statement, but it’s true.

For some of you who are reading this right now, 2024 will absolutely be the worst possible time you could consider buying a property.

Business Risk Problem

There is the spectre of interest rates possibly rising one  more time, inflation remaining higher for longer than hoped for, the continual media coverage predicting economic challenge, some property perma bears suggesting property prices will fall (which by the way is wrong) and geo-political tensions around the world.

In fact for some people, moving forward with a real estate purchase this year would have the potential to cripple them financially, not just now but well into the future.

Sounds dramatic, right?

And I’ll give you 9 reasons why this could be the worst time to buy property in a moment… but here’s the truth.

This statement rings true in 2024.

It was also true last year.

And the year before that.

And in 2015, 2010, 1985, 1972…

The reality of real estate is that…

There is no “best” time or “worst” time to buy property

Here’s why…

Property investment is a process, not just an event.

So rather than just talking about going out and buying a property in 2024, the right time for you to consider investing is when you have all your ducks in a row.

This means you have:

  • a strategic property plan, so you know where you’re heading and what you need to do to achieve your financial goals,
  • set up the right ownership structures to protect your assets and legally minimise your tax,
  • a robust finance strategy with a rainy day buffer in place to buy you time

Of course, for some 2024 will be a great year to invest, but in a moment I’ll explain why that will not be the case for others.

In fact, savvy property investors have been entering the market recently attracted by rising property values and skyrocketing rents.

Portion Of New Lending For Investment Housing Excl Refinance

The market has all the right essentials to attract investors.

FOMO (fear of missing out) is already creeping in as buyers realise all the price falls of 2022 have now been made up and the media keeps mentioning new record prices being achieved.

With the majority of cash rate hikes now likely behind us, but continued strong population growth at a time when we are not producing enough supply of new dwellings will exert upward pressure on house prices and rents throughout 2024.

The following chart shows the price upturn is now firmly entrenched with home prices hitting fresh record highs in many markets during the final months of 2023.

V shape property recovery

But 2024 is likely to be a year of slower property price growth and fragmented markets – but this is more “normal.”

It will also be a year when rents keep skyrocketing.

I see 2024 will be a year of two halves.

For the first part of the year, consumer sentiment will remain flat.

However it is likely that interest rates will fall in the second half of 2024 and at some stage next year it is likely APRA will relax its mortgage serviceability buffer.

This is currently at 3% and the combination of these factors will increase borrowing capacity and buyers and sellers will return regain confidence and move on with their lives.

Of course, currently each State is at its own stage of the property cycle and within each capital city there are multiple markets with property values still falling in some locations, and stagnant in others.

Rolling Quarterly Change In Dwelling Values

It’s likely that you’ve heard me talk about the drivers of property price growth over the years.

There are so many things that determine a property’s price performance and growth trajectory, many of which are well outside of your control, and some of which also have nothing to do with the property itself.

These include, but are not limited to:

  1. The economy – the performance and state of the broader economy impact people’s ability to buy and sell property as well as …
  2. Consumer Confidence – when people feel comfortable about their financial situation and their future job prospects they are more likely to make big purchases like moving home or buying an investment property.
  3. Employment levels – if the community at large is experiencing high levels of unemployment, then fewer people can afford to pay a mortgage, which reduces the demand for property
  4. Government policy – aspects to do with tax, depreciation, and homeownership grants will work to boost or reduce demand for property, particularly new property in recent years, which is where the federal government’s primary agenda has been.
  5. Population growth – or household formation to be more exact, as when more people move into an area this equals more demand for housing, whether it’s to buy or rent.
  6. Local Demographics – things like average incomes, average age, household structure, crime rates, and employment opportunities.
  7. Supply – The basic economic principle of supply and demand is a fundamental property market driver of price growth.
  8. Availability of credit – property investment is a game of finance with some houses thrown in the middle, but even owner-occupier demand is very much driven by the availability of finance and the cost of money, in other words, interest rates.

Now, as a result of these factors – which are by no means an exhaustive list, but they give you a general indication of some of the major influences on property prices – our property markets move through cycles, from booms to busts and back again.

In 2020-21 rising property values around Australia were driven by a combination of pent-up demand and historically low-interest rates leading to FOMO (fear of missing out), which led many home buyers and investors to make take shortcuts just to get in the market.

In 2022 we moved through the next stage of the property cycle – the adjustment phase – where property prices corrected in many locations around Australia.

In 2023 most capital city locations made up all the losses of the previous year.

Rolling Quarterly Change In Dwelling Values

A window of opportunity for long-term property investment

Currently, I see a window of opportunity for property investors with a long-term focus.

This window of opportunity is not because properties are cheap, because they are not, however when you look back in three years’ time the price you would pay for the property today will definitely look cheap.

The opportunity arises because, in general, consumer confidence is still low and many prospective homebuyers and investors are still sitting on the sidelines.

However, as I said, sooner rather than later many prospective buyers will realise that interest rates have peaked and inflation is continuing to fall.

And at that time there will be a pick-up in demand from buyers as greed overtakes fear, as it always does as the property cycle moves on.

Strategic investors will take advantage of the opportunities our property markets will offer over the next couple of years maximising their upsides while protecting their downsides.

Currently, buyers are still keen but are being more cautious and there is now a “flight to quality” with A-grade homes and investment-grade properties still selling well, but secondary properties languishing on the market.

Over the last few years, the apartment market hasn’t grown as strongly as the housing market, but now with the differential in price between units and houses at the highest level on record, and houses becoming more unaffordable for many, I can see continuing growth in family-friendly apartments in great neighbourhoods.

apartments vs houses

Even apartments in the CBD towers and accommodations around universities are renting well as immigrants and students return, however, these never really made good investments and I would steer clear of them.

And rents should also keep increasing around Australia as there is a desperate shortage of good rental accommodation.

Annual Change In Rental Rates National


So why could this be the worst time to invest for some people?

Please let me explain with an example…

Between 2016 and 2018, Sydney and Melbourne property values soared allowing those who owned properties in our two big capital cities to amass small fortunes along the way.

But it’s important to know that just because “Sydney boomed”, that doesn’t mean that ALL of Sydney’s housing boomed.

It means that overall, the majority of properties across the city experienced an increase in value.

However, there are always some areas, pockets, streets, and individual houses that perform better or worse than the average.

For example, the value of the apartments in many of the high-rise, Legoland towers around Sydney languished as concerns about structural integrity, following the Opal Towers debacle tarred all new apartments with the same brush.

Of course, the concerns raised by COVID-19 only added to this a few years later.

Let me give you a different example.

Let’s say a couple owned a property in a sought-after Sydney suburb in 2017.

They had purchased it 12 months earlier for $1.55m.

It’s right in the middle of a booming property market and sadly, the couple split up.

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