2025 Australian Housing Market Forecast: Trends and Predictions

As we look towards 2025, the Australian housing market continues to evolve, marked by steady growth and significant milestones.

According to CoreLogic, property prices have consistently risen, with a national increase of 0.3% reported in October—highlighting the 21st consecutive month of growth. Remarkably, Australia's residential real estate market has reached a new peak, with a total valuation of $11 trillion, showcasing record-high property values in major cities like Sydney, Brisbane, Adelaide, and Perth. But what will 2025 hold?

Decelerating Growth Amidst Rising Opportunities

Despite the continued rise in property prices, there is a noticeable slowdown in the pace of growth. In the September quarter, national property values saw a modest rise of just 1%, marking the slowest rate of increase since March 2023. The annual growth rate has similarly softened to 6.7%. This deceleration is attributed to an increase in property listings and a more cautious behaviour from buyers, as noted by CoreLogic’s analyst, Kaytlin Ezzy.

The PropTrack Property Market Outlook highlights that the slowing home-price growth in 2025 could open a strategic window for buyers

Recent Market Developments

The first half of 2024 saw national home values increase by 4.1%, slowing to just 0.7% in the latter half, with cities like Melbourne, Hobart, and the ACT experiencing declines.

Towards the end of 2024, a shift occurred with the national Home Value Index (HVI) recording its first decline in almost two years. December saw a slight decrease of -0.1%, pulling the quarterly change into negative territory. This downturn reflects the market's adjustment to ongoing high interest rates, cost of living pressures, and diminished borrowing capacity.

CoreLogic’s research director, Tim Lawless, observes, “This result represents the housing market catching up with the reality of market dynamics. Affordability constraints and higher supply levels have gradually weakened buyer demand.”

Regional Variations and Future Outlook

While some capital cities faced downturns, mid-sized capitals like Perth, Adelaide, and Brisbane demonstrated significant growth, albeit at a decelerating pace from their peak rates earlier in the year. For instance, Adelaide overtook Perth in the December quarter, with property values increasing by 2.1%. It is expected that this will continue to be the case into 2025, with housing prices in Perth particularly expected to grow whilst Sydney and Melbourne will likely decrease.

Moreover, regional markets ended the year stronger than most capitals, with noteworthy rises in areas of Western Australia, South Australia, and Queensland. The affordability issues and reduced borrowing power have pushed buyer demand towards lower-priced markets, which in turn have seen the highest growth rates.

The Role of Interest Rates and the Federal Election

The PropTrack report sheds light on additional external factors that are set to impact the market. The ongoing high interest rate environment and an anticipated federal election are expected to temporarily suppress market activity, creating potential buying opportunities.

Strategic Considerations for Homeowners and Buyers

For homeowners, the escalating property values could unlock significant equity, which might be used for investments or renovations. Those contemplating property purchases should consider the current trends and future forecasts as pivotal in their decision-making processes.

Given this backdrop, if you're considering a property purchase or sale, now might be the optimal time to explore your options. The anticipated moderation in price growth coupled with potential rate cuts in the latter half of the year could dramatically alter market dynamics, favouring both strategic buying and selling.

Navigating the Market with IDEAL Financial

IDEAL Financial Group provides expertise in mortgage brokering, which can be invaluable for those navigating the fluctuating housing market.

By understanding the impact of Reserve Bank decisions and leveraging their extensive network of lenders, we can help you secure a mortgage that aligns with your financial situation and goals.

Whether you're buying your first home or investing in property, IDEAL Financial provides tailored support to guide you through the complexities of mortgage arrangements.

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