Which capital cities shape up as the investment hotspots of 2024?

It’s expected that Adelaide property keep powering onwards and upwards in 2024 as it has all the drivers for a solid investment market.

This growth will be matched in Perth and Brisbane, where we have seen some of the strongest gains throughout 2023.

These markets are underpinned by strong employment growth, housing affordability and strong rental returns still attracting investors and homebuyers alike to these markets.

Keep in mind, Adelaide, Perth and Brisbane offer something for everyone, with low entry price points for first time buyers, strong rental demand and rental growth for investors and great work and lifestyle amenities for families and retirees.

When considering these markets, stay within 45 minutes to the city and only look at established properties, and nothing off-the-plan.

Distance from the CBD is a key player in the Adelaide, Brisbane and Perth market, as people don’t commute an hour to work as they do in Sydney and Melbourne.

Sydney property off to wobbly start

Sydney had a rocky start to 2023, with negative growth trends and soft selling prices but managed to rally toward the back end of the year and close out the year up 11.4 per cent over the past 12 months.

The slowing of rate rises and lack of housing stock has put the pricing pressure back on the Sydney market and pushed values north again.

With a lack of new construction and dwelling supply, due to supply chain shortages over the past few years and a lack of skilled trade labour, the housing shortage will continue into 2024 in parallel with population growth and continued demand on housing stock.

The lack of housing supply will create growth in the front end of 2024, however, this will not be enough to save the Sydney market in the back end of the year.

Expect modest gains in this market for the early part of 2024, but a high level of mortgage stress to prevail if rates continue to rise into 2024, especially given Sydneysiders carry the highest mortgages in the country.

If rates do rise, as has been hinted at by the RBA, this will affect the $2 million-plus market much more than the sub $2 million market, with less building occurring for unit and high-density developments due to skyrocketing construction costs.

The unit market will see some price increases but the $2 million plus market will feel the effects of upcoming interest rate rises.

Melbourne, Canberra real estate subdued

Similar trends to that of Sydney have been seen in Melbourne, with more modest gains of only 3.9 per cent over the past year for the second largest capital. The last quarter has seen dwelling values fall 0.9 per cent.

Expect to see a slight improvement on this upward growth heading in to 2024, but again, the RBA will seal the fate of the Melbourne market if rates continue to trend upwards early in 2024.

Melbourne’s inner suburban and CBD areas, however, are experiencing soaring rents that could be the precursor to a turnaround in 2024.

Canberra has experienced modest capital growth over the year of 1.2 per cent.

Canberra was coming off a bumper few years of unrivalled growth, so this correction is expected and welcomed and may continue through to 2024.

This year is likely to generate a very small decline, or a plateau of values followed by market stability for the nation’s capital.

Darwin, Hobart investor no-go zone

It’s no secret the markets that felt the most pain in 2023 were Hobart and Darwin, with former seeing a 0.4 per cent decline in dwelling values and Darwin down 0.1 per cent. 

Both have seen a few years of pressure due to a lack of diverse job creation and infrastructure spending and Hobart in particular has been propped up by interstate investors who are now jumping ship to reduce their mortgage costs.

This is set to continue throughout 2024 and Hobart is likely to see the most pain, with Darwin close behind.

Where should property investors turn their gaze?

It’s all eyes on Adelaide, Perth and Brisbane for 2024 residential investors.

Investors should be mindful that if rates continue to rise this will put pressure on borrowing power as banks look at income versus cost of loan.

Sophisticated investors should keep an eye on the industrial real estate sector, which will yield some strong results with a fundamental lack of available stock plaguing the sector for many years, driving pricing up.

The seniors living sector is also booming due to an ageing population, which will continue through 2024, as will medical assets for the same reason.

While some retirees will put their hard-earned savings into retirement village properties, experts do warn that far from being just another property purchase, a retirement unit purchase needs extra careful consideration and are widely seen as an investment in lifestyle rather than financial security.

Residential, commercial assets to avoid

A sector that may weaken in 2024 is childcare as there is an oversupply looming in some locations.

Older homes and units will likely as the new seven-star energy rating framework comes into effect.

Investors should also avoid house and land packages in 2024, especially in the current lending environment.

Finance approvals are not secure and if your circumstances change or the value changes between buying off-the-plan and settlement, you may not be able to complete the purchase and this could be a costly mistake.