Feeling uncertain about the Australian property market?
You're not alone. With talks of interest rate changes, shifting economic landscapes, and varying predictions for 2025, it's a tricky time to navigate.
But what if , informed decisions will provide security.
This article dives deep into the data, expert opinions, to create a property pathway.
The end of 2024 and the very beginning of 2025 witnessed a slight, but significant, shift in the Australian housing market.
After nearly two years of consistent growth, national home values experienced a minor dip of 0.1% in December 2024, according to CoreLogic.
Source: CoreLogic
This wasn't a crash, but rather a softening, signaling a potential change in the market's momentum. PropTrack also recorded this decline.
This national figure, however, masks the diverse performance across different capital cities.
Melbourne and Sydney, traditionally the powerhouses of the Australian property market, saw the most noticeable declines, with drops of 0.7% and 0.6% respectively, in December.
Canberra and Hobart also saw minor price reductions.
On the other hand, according to SBS News and PropTrack, Perth continued its impressive run, posting a 0.7% increase in December, confirming their best performant capital city, reaching values sitting at 17.5%.
Source: PropTrack
Adelaide and Brisbane also showed resilience, with values rising by 0.6% and 0.5% respectively.
These variations highlight the importance of understanding regional differences when analyzing the national market.
Several intertwined factors are poised to shape the Australian housing market in 2025. Let's break them down:
Based on the KPMG economic report, The Reserve Bank of Australia (RBA) held the cash rate steady at 4.35% through much of 2024.
This prolonged period of higher rates has significantly impacted borrowing capacity and contributed to the late-2024 market softening.
However, the anticipation is building for rate cuts sometime in 2025.
KPMG analysis, and various cited articles express this potential move.
While KPMG projects that it will occur midway through the year, My Housing Market anticipates it happening earlier.
This potential decrease will act to refuel the activity.
Australia's overall economic growth has been sluggish, growing at its slowest pace in 33 years, outside the pandemic period.
Inflation, while easing, remains a concern.
The interplay between inflation, wage growth, and unemployment will be crucial in determining the RBA's interest rate decisions and, consequently, the housing market's trajectory.
KPMG expects that, globalwise, the pace for 2024, slightly lower than in 2023.
Strong Population growth at a time of limited supply and strong jobs market provide strong foundation for further growth.
A chronic undersupply of housing, particularly in major cities, has been a long-standing issue in Australia.
This imbalance between supply and demand puts upward pressure on prices.
While building approvals showed some signs of increasing in late 2024, the construction industry faces ongoing challenges, including labor shortages and rising material costs, resulting in only a limited translation of increase in actual housing completions.
Australia's strong population growth, fueled by immigration, significantly impacts housing demand.
While the government is forecasting decline to Net Oversea Migration levels, it remains to know whether it will continue exciding projections, putting pressure in particular urban zones such as Sydney, Melbourne and Brisbane.
Government policies, such as tax incentives (negative gearing is specific to Australia) for investors and first home buyer grants, can influence market activity.
Any changes to these policies in 2025 could have a noticeable impact.
Potential changes to negative gearing will probably influence the dynamics.
According to a study made by Daily Mail, Chinese buyers shows some signs of coming back, and overseas investors were attracted by the lower level reached by the Australian dollar.
The overall consensus among experts is for a period of moderate growth in the Australian housing market in 2025, particularly in the second half of the year, contingent on interest rate cuts.
Source: Dr. Andrew Wilson LinkedIn
Predicts that Brisbane, Perth, and Adelaide will continue to outperform other capital cities.
He anticipates a rebound in prices later in the year, fueled by lower interest rates and strong underlying demand.
Source: Eliza Owen LinkedIn
Acknowledges the late-2024 downturn but believes it will be "shallow and short-lived."
She emphasizes the fundamental shortage of housing and anticipates a return to modest growth, contingent on improvements in affordability and loan serviceability.
Source: KPMG
Forecasts that national house prices will grow by 3.3% in 2025, and 6.0% in 2026.
KPMG expects annual rent grow in the mid-3% to mid-4% over the next two years based on our projections for new dwelling completions and Commonwealth Treasury's population forecasts.
Unit price will follow the same trend and grow, with affordability constraints.
Source: SQM Research
Managing Director Louis Christopher express it will be challenging for the participant.
The expectation of interest rates decrease from the first quarter 2025 did not happen.
If it materialises later this year, prices can potentially grow by 6% to 10%.
Foresees continued price growth in Queensland and Western Australia, driven by strong demand and limited supply.
Anticipates outperforming for this areas.
| City | Predicted Trend (2025) | Key Factors |
| Sydney | Modest growth, potential for stronger rebound later. | Affordability constraints remain a challenge, but strong underlying demand and a shortage of supply support price stability. |
| Melbourne | Underperformance, Potential for Growth recovery | High supply, weak economic forecast in a first step. |
| Brisbane | Continued strong growth. | Population growth, infrastructure projects (Olympics 2032), and relatively affordable prices compared to Sydney/Melbourne. |
| Perth | Continued strong growth. | Strong mining sector, population growth, and relatively affordable prices. |
| Adelaide | Moderate but balanced Growth | Affordability advantages and investor-friendly policies may give room for positive results. |
| Hobart, Darwin, Canberra | Moderate growth | Stabilisation noticed |
While the Australian housing market presents potential opportunities, it's crucial to be aware of the risks:
Perth and Brisbane: Strong growth prospects due to economic fundamentals and population growth.
Units: May offer a more affordable entry point into the market, particularly in capital cities.
Regional Areas: Some regional areas, particularly those with strong local economies, may offer attractive growth potential.
Interest Rate Uncertainty: Further rate hikes (though less likely) could dampen market activity.
Affordability Constraints: High property prices, especially in Sydney and Melbourne, remain a significant barrier for many buyers.
Economic Slowdown: A weaker-than-expected economic performance could negatively impact employment and housing demand.
Global uncertainties, among others about trade tensions.
Do Your Research: Thoroughly research different cities, suburbs, and property types. Understand local market conditions and trends.
Get Financial Advice: Consult with a mortgage broker or financial advisor to assess your borrowing capacity and understand your financial options.
Be Realistic: Set a realistic budget and be prepared to compromise.
Long-Term Perspective: Property investment is typically a long-term game. Don't be swayed by short-term market fluctuations.
Due Diligence: Conduct thorough inspections and building reports before making an offer on a property.
Diversify across various location, property type...
Most experts predict a period of slower growth or minor corrections, rather than a significant crash. Underlying demand and limited supply provide a buffer against a major downturn.
It depends on your individual circumstances and investment goals. If you're a long-term investor, 2025 could present opportunities, particularly in certain cities and property types.
Perth and Brisbane are generally considered to have the strongest growth prospects.
Anticipated interest rate cuts in the second half of 2025 are expected to boost buyer confidence and potentially fuel price growth.
Affordability constraints, economic uncertainty, and potential interest rate movements (up or down) are key risks to consider.
Units may offer a more affordable entry point into the market, especially in major cities where house prices are high.
Some experts suggests yes, particularly Melbourne and Sydney, and anticipate stabilisation in the second half of 2025, with potential rates decrease.
The Australian housing market in 2025 is likely to be a dynamic and evolving landscape.
While challenges remain, including affordability issues and economic uncertainties, opportunities exist for informed buyers and investors.
Careful research, a long-term perspective, and expert advice are key to navigating this market successfully.
This anticipated series of cuts in the rates, will probably support prices and encourage new investment.
Ultimately, navigating the Australian housing market throughout next year may reveal itself tricky but promising, provided that external influences are under control.
The interplay between the various other key drivers exposed in this article are, by their very nature, subject to ongoing monitoring.
Keep up with regular tracking on reliable indicators, and be amongst the first to be informed.
Are you excited about the Australian housing market in 2025 and keen to have a share of the pie? Please complete the form below to discuss how we can optimise your property investment strategy now!
Citation, Reference and Related Information About the Australian Housing Market in the Year 2025
1. PropTrack
PropTrack Home Price Index December 2024
2. CoreLogic
Australia’s housing market has just entered a downturn – what’s behind the shift?
3. KPMG
Australia Economic Outlook: Q4 2024
KPMG Residential Property Market Outlook
4. SQM Research
National Property Listings off to a Strong Start! New Listings up by 18.1% Compared to January 2024.
5. Firstlinks
What to expect from the Australian property market in 2025
6. Daily Mail
Chinese buyers swarm in on Australia's housing market
7. Michael Yardney’s Property Investment Update
Home Prices Start 2025 Lower | Latest Housing Market Stats Dr.Andrew Wilson
8. SBS News
Why Australian property prices have dropped for the first time in two years
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