2025 Australian property market outlook
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As the new year approaches, Australia's national median property price sits at an all-time high.
While annual price growth has been monumental in some markets, there is an easing across the board as high interest rates and poor affordability put pressure on buyers.
With rate cuts expected in the first half of 2025, will there be another resurgence or are we looking at a more stable year ahead? Find out what the experts are saying.
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2024 has been a mixed bag
After a run of interest rate hikes from May 2022 to November 2023, the current year has been marked by rates remaining high but unchanged.
That's largely driven buyers to look for more affordable housing options around the country, driving significant growth in cheaper capital cities.
As of November 2024, Perth, Adelaide and Brisbane are the three big outperformers of the capitals, with Perth gaining close to +20 per cent since January.
By contrast, Sydney and Melbourne have seen much smaller movements. Sydney is up by +3.4 per cent for the year but saw a slight decline in October, while Melbourne has dipped by a modest -1.7 per cent over 2024.
That hunt for affordability has also propelled the less expensive end of our markets to significantly outperform more pricey homes.
CoreLogic's Tim Lawless explained that "A combination of less borrowing capacity and broader affordability challenges, as well as a higher-than-average share of investors and first home buyers in the market is the most likely explanation for stronger conditions across the lower value cohorts of the market."
Overall, the pace of growth around the country has slowed in the second half of the year as more sellers have looked to capitalise on strong growth over recent years.
So could rate cuts shake up our housing markets once again in the new year?
Interest rates are predicted to fall in 2025
The RBA began hiking interest rates at a rapid rate in 2022 as a reaction to runaway inflation. Now that Australia's inflation figures are looking far more promising, the expert consensus is that rate cuts are on the horizon.
Exactly when they arrive is still a matter of debate, but it's widely expected that the RBA will make their first move in the first six months of the year.
Big four banks' cash rate forecast 2024-25
| Bank | Month of first cut | Rate low-point | Month of rate low-point |
|---|---|---|---|
| Westpac | May 2025 | 3.35% | December 2025 |
| NAB | May 2025 | 3.10% | June 2026 |
| ANZ | May 2025 | 3.85% | August 2025 |
| CBA | February 2025 | 3.35% | December 2025 |
Westpac, NAB and ANZ have pushed their forecast for the first rate cut out to May 2025, while CBA still has its sights set on February.
From there, the cash rate is expected to drop from its current high of 4.35 per cent down to anywhere between 3.85 per cent and 3.10 per cent over the course of the next 18 months.
Finder's head of consumer research Graham Cooke sees the potential for a resurgence in price growth if four rate cuts were on the cards.
He told REA that, "While rate cuts might alleviate some financial pressure on current homeowners, they could also reignite demand in the housing market, potentially driving up property prices again.
Price growth may continue easing in 2025
Although rate cuts could serve to stimulate Australia's property markets once again, the widespread expectation seems to be that price growth in 2025 will be slower than it has been in 2024.
Looking at Australia as a whole, here are the big banks' predictions for the year ahead:
- Westpac forecasts national annual growth of +3.0 per cent.
- NAB forecasts national annual growth of +4.2 per cent.
- ANZ forecasts national annual growth of +5.5 per cent.
Zooming in to NAB's city-by-city predictions, the bank predicts less extremes in diversity across all of the capital cities in 2025, with NAB Chief Group Economist Alan Oster foreseeing "a softer but still positive rate of growth following the strong growth in prices over recent years."
NAB sees Perth, Adelaide and Brisbane continuing to deliver the strongest growth amongst the capitals, with Sydney, Melbourne and Hobart showing signs of moderate recovery.
Mr Oster concluded that, "Though price growth has slowed somewhat, underlying demand for property remains strong with the population expected to remain elevated in the near-term."
What else is predicted for Australian property in 2025?
Each year, SQM Research Managing Director Louis Christopher releases his Boom and Bust report which includes some more nuanced projections for the year ahead.
This year, Mr Christopher has again presented four distinct paths Australian property could go down depending on a range of factors.
Population growth is one of those key factors. Australia's rapid population growth of the past 18 months has been a major driver of buyer demand, helping to support property prices around the country at a time when new housing builds have fallen below sustainable levels.
As far as this imbalance between supply and demand goes, Mr Christopher said "We are not anticipating much of a change in these current trends," suggesting competition amongst buyers will continue to be strong.
SQM will also be keeping a close eye on inflation. While the current sense is that the RBA has done enough with interest rates to keep inflation within the target range, any unexpected changes could disrupt the path to rate cuts, putting a dampener on price growth.
If everything goes as expected, Mr Christopher's position is that Perth, Adelaide and Brisbane will see very strong gains in 2025, while Melbourne and Sydney are in for small declines.
But the four-scenario forecast highlights the fact that there are a lot of moving parts when it comes to forecasting, and a wide range of outcomes are possible.
It's critical for sellers to research their own local markets to find out what's in store for a particular suburb as the big-picture forecasts may not apply across the board.
Thinking of selling?
If you're looking to get in on the action in 2025, it's important to be as prepared as possible in order to cut through the competition and achieve a standout result.
Step 1: Understanding how your market is performing
Every market is different, and understanding your local market is fundamental to making the right selling decisions. Our guide to tracking market trends and data will help you to get a clear picture of how your market is performing and how that impacts you as a seller.
Step 2: Know what your property might be worth
Getting a free home value estimate is a great way to set a foundation for your selling expectations and begin planning the path forward.
Step 3: Get a no-obligation market appraisal from a top real estate agent
Understand what your property could sell for in the current market by speaking to the top-performing agents in your suburb. Comparing top agents in your area will help you find the perfect partner for your selling journey and move towards a successful result.
Step 4: Finally, get your property listing-ready
Taking a thorough approach to preparing your home for sale is another critical step. From cleaning, decluttering, painting and performing other cosmetic renovations to home staging, photography and marketing, getting your property to sale-ready condition is a must.
