Is 2024 A Good Time To Buy Real Estate In Melbourne?

Will interest rates crash property prices in 2024? 

When the Reserve Bank increases interest rates, it often correlates with a reduction in property values. Higher interest rates often mean that people borrow less to purchase a property, which means that the pool of funds available for a particular property is reduced.

A fall in the value of the property is a win for homebuyers, especially if they’ve been watching on over the past few years as prices soar out of their reach. Investors are often trying to predict the bottom of the market to maximise their returns.

Over 2022 and 2023 the Reserve Bank of Australia raised interest rates 12 times. So why have house prices increased in 2023? 


A problem with supply. 

The constrained supply aspect often plays a significant role in property market dynamics. If there’s a shortage of available housing, it can put upward pressure on prices as demand outstrips supply.

The decision by the Albanese Government to welcome 650,000 new migrants by mid-2024 signifies a substantial shift in Australia’s ability to supply new housing. 

The warning from Infrastructure Victoria about the need to build 44,000 new homes annually in Melbourne underscores the pressing challenges posed by population growth. Accommodating an additional 3.1 million people by 2051 is a substantial task that requires careful planning and execution, particularly in the realm of housing.

However, the concern raised by SQM Research managing director Louis Christopher regarding the impact on the housing market is notable. With Melbourne already grappling with ultra-low rental vacancy rates, a surge in immigration could further put upward pressure on property prices. 

Impact of interest rates

The statement about low levels of supply countering the adverse effects of interest rates suggests that, at least in the short term, the demand for housing is strong enough to withstand potential negative impacts from interest rate changes. This resilience could be due to factors like a robust economy, low unemployment or an increase in population.

Patience for better interest rates?

If you’re keeping an eye on mortgage rates and they’ve been volatile, exercising patience could be a strategic move. Mortgage rates can significantly impact the overall cost of homeownership, and waiting for a favorable rate might save you money in the long run.

The mention of volatile mortgage rates, peaking at 6.5 percent in late 2023 and then retreating by mid-2024, underscores the importance of being aware of broader market conditions. Mortgage rates can significantly impact the affordability of a home, so paying attention to trends and fluctuations is wise.

The advice to exercise patience if you’re waiting for lower mortgage rates reflects an understanding that interest rates can impact the overall cost of homeownership. However, it’s important to balance this with other factors, such as the potential for home prices to rise while waiting for rates to drop.

The elephant in the room, declining inflation. 

According to the Reserve Bank Of Australia, Inflation is forecast to decline to be around 3¼ per cent by the end of 2024 and to be back within the 2–3 per cent target range in late 2025.

Historically, lower inflation impacts interest rates by making money cheaper to borrow. When interest rates are lowered, households are incentivized to borrow more, drawn by the prospect of reduced repayments. This dynamic not only stimulates increased borrowing for various purposes but also significantly impacts the housing market.

Lower interest rates make homeownership more accessible as mortgage repayments become more affordable, consequently fostering heightened demand for housing.

Considering property prices are increasing in a high inflation high interest rate environment, the outlook for property prices declining when the cost of money is cheaper seems unlikely. 

Predicting the property market

Even investment advisers have a challenging time predicting what the market will do over time. It is easy to look back when all the facts and data are known. And you can take these to look for similar trends in the future, but no one gets it right all the time.

Many people will look at the market and not fully understand if it is the right time to buy or should they hold off. In an uncertain market, the level of worry for investors can be monumental. However, waiting for the ideal time to buy can see many missed opportunities especially when today’s high prices are tomorrow’s bargains.