Australian Property Market Outlook 2025: Growing Potential Amid Global Uncertainty

Despite ongoing global economic uncertainty and trade tensions, the Australian property market is poised for growth in 2025, according to insights from ME Bank and leading economists. Here’s what brokers, buyers, and investors need to know about the factors shaping the market this year.

Interest Rate Cuts Set to Boost Activity
The Reserve Bank of Australia’s (RBA) decision to cut rates in February 2025 has already injected some life into the housing market, particularly in major cities. Peter Munckton, Chief Economist at BOQ Group, suggests that the possibility of two or more further rate cuts could push house price growth beyond the previously expected 1–2% range, potentially reaching mid-single digits.

Key Takeaway:
Lower interest rates typically make borrowing more affordable, encouraging both upgraders and first-home buyers to enter the market.

Affordability Remains a Major Constraint
While rate cuts are positive, housing affordability remains at record lows. The proportion of a median family’s income required to meet average loan repayments is high across all states, with New South Wales and Victoria among the least affordable. This has been a significant brake on market activity, especially for owner-occupiers.

State-by-State Affordability (Dec 2024):

• NSW: 59.9% of income needed for loan repayments
• VIC: 47.0%
• QLD: 49.6%
• SA: 48.4%
• WA: 42.5%
• TAS: 43.6%
• NT: 34.3%
• ACT: 19.2%

(Source: REIA Housing Affordability Report, March 2025)

Economic Backdrop: Resilience Amid Global Challenges
Global trade tensions, particularly US tariff measures, are a source of uncertainty. However, Munckton notes that Australia’s economy has weathered similar storms before, such as during the Asian crisis in the 1990s. A weaker Australian dollar and further rate cuts could help cushion any negative impacts from global events.

Positive Signs:

• Most mortgage borrowers have healthy buffers in offset accounts.
• The share of borrowers in severe mortgage stress remains low (around 1–3%).

Market Dynamics: Regional Variations and Supply Factors

• Melbourne: Poised for a rebound, with strong population growth and limited new housing supply.
• Brisbane, Adelaide, Perth: After strong growth in recent years, these more affordable markets may see slower price increases as affordability becomes stretched.
• Supply: New housing approvals are starting to pick up, which could help ease price pressures as more stock comes onto the market.

What’s Driving Demand in 2025?

• Owner-Occupiers: This segment slowed in 2024 due to affordability pressures, but could see a resurgence as conditions improve.
• Upgraders: With potential wage growth outpacing inflation and the benefits of recent tax cuts, more homeowners may consider trading up.
• First-Home Buyers: If affordability improves, expect a modest increase in this group.
• Units: Demand may shift toward units, where price growth has lagged behind stand-alone houses.

Advice for Brokers: Prepare for Competition
With a more active market and improved borrowing conditions, brokers can expect increased demand—but also tougher competition. Munckton’s advice: “Whatever you do well, keep doing it because there’s going to be tough competition out there.”

Summary: 2025 Property Market Outlook

• Growth Potential: House price growth is likely to exceed early forecasts, especially if further rate cuts occur.
• Affordability: This is still a major challenge, but may improve with lower rates and increased supply.
• Resilience: The market is expected to remain robust, even amid global economic headwinds.
• Opportunities: Upgraders, first-home buyers, and unit seekers may drive activity.
• Brokers: Should focus on their strengths to stand out in a competitive landscape.

For a more detailed analysis, see the original feature on MPA Magazine Australia.

In summary: 2025 is shaping up as a year of renewed opportunity for the Australian property market, with interest rate cuts and supply improvements likely to outweigh global uncertainties. Stay informed, focus on your strengths, and be ready to seize the opportunities ahead.