Property Market Outlook for 2025 - January Market Update 2025

By Rich Harvey, CEO & Founder, propertybuyer.com.au

2025 promises to be a year of contrasts, as Australia’s property markets navigate complex and multifaceted forces. While critical undersupply will remain a significant theme, varying performance across cities and regions will highlight the diverse nature of market drivers. 

To give you my insights into what is likely to transpire in 2025, I’ve analysed over 10 major reports and articles to review and contrast current and future conditions (including SQM’s Boom & Bust Report, CoreLogic, RBA, ABS, Ray White, McGrath and REA research).  

The undersupply of housing, with current construction rates projected to fall below 150,000 annually against a demand for 250,000 new homes, will underpin upward pressure on prices. High building costs, labour shortages, and planning constraints are the key culprits. Combined with the RBA’s anticipated mid-year interest rate cuts, this structural shortage is poised to reignite investor confidence and spur growth in many markets. 

City Insights 

• Sydney: Sydney’s resilience will shine despite early-year softness. Elevated listings and weak auction clearance rates point to moderate price falls initially. However, easing interest rates mid-year will likely stabilise demand. Affluent suburbs and well-connected middle-ring areas remain attractive due to Sydney’s strong economic fundamentals, robust employment market, and enduring appeal to international buyers. 

• Melbourne: Melbourne’s market will continue to face headwinds, with projections for slow or flatlined growth in 2025. The city’s high stock levels and subdued demand, exacerbated by reduced overseas migration, suggest a slower recovery. However, counter-cyclical opportunities exist in undervalued middle-ring houses and apartments, with longer-term potential tied to the city’s strong population growth and cultural magnetism. This is the ideal opportunity to buy at the bottom of the cycle.  

• Brisbane: Brisbane remains a standout performer (and likely for next 5+ years), fuelled by heavy interstate migration and infrastructure investment in the lead-up to the 2032 Olympics. Double digit growth is expected, highlighting tight rental markets and vibrant regional hubs like the Gold Coast and Sunshine Coast. Savvy investors will focus on areas benefiting from infrastructure and lifestyle-driven demand. 

• Adelaide: Consistently reliable, Adelaide’s affordability and robust local economy are expected to drive strong price growth in 2025. Key sectors such as defence and technology will support employment and housing demand, particularly in proximity to job centres. 

• Perth: Perth had nearly 25% growth in 2024, driven by a buoyant resources sector and sustained population growth, and looks set to continue growth at a lower rate. Iron ore price volatility poses a serious risk and could lead to a rapid housing market change. However, Perth’s affordability and lifestyle appeal ensure continued buyer interest.  

• Hobart: After years of exceptional growth, Hobart’s market is stabilizing. Population stagnation and limited economic expansion may restrict growth, though its unique lifestyle appeal will continue to attract selective buyers. 

• Canberra: Canberra’s reliance on public sector employment provides stability, but subdued economic and population growth will weigh on demand. Established homes near employment hubs offer the best potential for steady rental returns. 

Major Drivers to Watch 

1. Interest Rates: A potential 50-basis-point rate cut by mid-2025 will likely spur demand, particularly in Sydney and Melbourne. However, delays in rate adjustments could prolong stagnation in higher-cost markets. I believe we will see three rate cuts in 2025.  
2. Migration and Supply: High migration levels, exceeding 500,000 annually, will intensify demand pressures. This influx, coupled with construction shortfalls, will exacerbate the rental crisis and elevate the desirability of established homes. 
3. Geopolitical and Economic Factors: Stability in energy and commodity prices, supported by easing geopolitical tensions, will play a crucial role in economic and housing market performance, particularly in resource-heavy states like WA and Queensland. 
4. Regional Opportunities: Secondary markets such as Newcastle, Central Coast, Byron, Geelong, and the Sunshine Coast offer attractive alternatives to capital cities, particularly for lifestyle-driven buyers. 
5. Investor Strategies: With rental yields tightening, investors should focus on high-demand property types such as dual-living homes, granny flats, and rooming houses. 

Rental Market Outlook 

The rental market in 2025 will continue to face significant pressure as demand outpaces supply. High migration levels, projected to exceed 500,000 annually, combined with a shortage of new housing, will exacerbate rental shortages in most cities. Vacancy rates are expected to remain tight, particularly in high-demand areas like Brisbane, Perth, and Adelaide, where rental yields are already robust. 

While rents are unlikely to experience the double-digit growth seen in previous years, moderate increases aligned with CPI are anticipated in many regions. SQM Research notes that rental market adjustments have already started, with shared living arrangements becoming more common to combat affordability pressures. Nonetheless, established suburbs with strong transport links and employment opportunities will continue to see elevated rental demand. 

Investors are likely to benefit from these trends, particularly in markets with low vacancy rates and stable tenant demand. Properties catering to the evolving needs of renters, such as dual-living setups and smaller apartments in urban hubs, will be especially sought after. The ongoing structural supply shortage ensures that the rental market will remain a critical focus for policymakers and investors alike. 

Key Risks and Opportunities 

While opportunities abound, don’t just buy the next shiny new thing! I would exercise caution in niche markets such as NDIS properties, off-the-plan developments and speculative ventures. Elevated construction costs may deter new builds, reinforcing demand for established properties. Buyers should adopt a long-term perspective, focusing on areas with robust infrastructure, employment growth, and lifestyle appeal. 

Summary 

The property market in 2025 will be shaped by a convergence of challenges and opportunities resulting in slower rates of growth. Buyers and investors who remain agile, informed, and strategic will find significant value in markets poised for the next growth cycle. With structural supply shortages, easing monetary policy, and Australia’s enduring appeal, the stage is set for a transformative year in real estate. 

And finally, here’s my forecasts for the year ahead:  

Propertybuyer’s House and unit price forecasts for 2025. 

To get your property plans on track for 2025, please reach out for an obligation free chat today. 

Call us on 1300 655 615, send us an email to info@propertybuyer.com.au or fill in our enquiry form here. We’d be delighted to support your property journey.  

Wishing you and your family and fun, prosperous and safe New Year! 

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