What Will the Australian Housing Market Look Like in 2025?

The Australian housing market in 2025 sits at a crossroads. Buyers wonder if prices will finally ease. Investors question whether growth will return. Renters face unprecedented pressure as vacancy rates hover near record lows.

After years of volatility—pandemic-era surges, rapid interest rate hikes, and persistent affordability challenges—Australians need clarity. Will 2025 bring relief or further strain? This analysis unpacks expert forecasts, government policy shifts, and the economic forces shaping property values across the nation.

Whether you’re planning to buy your first home, expand your investment portfolio, or simply understand where the market heads next, this guide provides the data-driven insights you need.

Overview of the Australian Housing Market in 2024

The Australian housing market in 2024 delivered mixed signals. National dwelling values rose modestly—approximately 4-6% across most capital cities according to CoreLogic data—but growth slowed significantly compared to the double-digit gains seen in 2021-2022.

The Reserve Bank of Australia held the cash rate at 4.35% throughout most of 2024, maintaining restrictive monetary policy to control inflation. This kept mortgage repayments elevated and dampened buyer enthusiasm, particularly among first-home buyers who faced serviceability hurdles.

Sydney and Melbourne recorded the slowest growth, with prices barely moving in some quarters. Brisbane continued its post-pandemic momentum with 7-8% gains, while Perth emerged as the strongest performer with increases exceeding 10%. Adelaide maintained steady growth around 6-7%, supported by interstate migration and relative affordability.

Supply constraints remained a defining feature. The Australian Bureau of Statistics reported dwelling approvals remained 20-25% below pre-pandemic levels, while construction costs stayed elevated due to labour shortages and material expenses. Net overseas migration recovered to approximately 250,000-300,000 people annually, adding demand pressure without matching housing supply.

2024 Median House Prices (Approximate)

Source: CoreLogic quarterly reports, 2024

This uneven performance set the stage for an uncertain 2025, where policy decisions and economic conditions will determine whether the market stabilises, corrects, or resumes growth.

What Experts Predict for the Australian Housing Market in 2025

Forecasters approach 2025 with cautious optimism tempered by significant unknowns. Most major property analysts expect modest growth, but predictions vary widely based on assumptions about interest rates and economic resilience.

1. CoreLogic and PropTrack Forecasts

CoreLogic’s December 2024 forecast projected national dwelling values to rise 3-5% in 2025, assuming the RBA begins cutting rates mid-year. Their analysis suggests Sydney and Melbourne will see subdued growth of 2-4%, while Brisbane may moderate to 4-6% after strong recent gains. Perth could maintain momentum with 5-7% growth if mining sector strength continues.

PropTrack’s research team offered a similar outlook, predicting 4-6% national growth with stronger performance in affordable markets. Their models indicate regional centres within commuting distance of capital cities may outperform, particularly in Queensland and Western Australia.

Both organisations emphasise that forecasts hinge on RBA policy shifts. If rates remain elevated longer than expected, growth projections could halve or turn negative in overheated markets.

2. Economist Insights and RBA Outlook

The Reserve Bank’s most recent statements through late 2024 maintained focus on returning inflation to the 2-3% target band before considering rate cuts. Most economists surveyed in January 2025 expect the first rate reduction between May and August 2025, with 2-3 cuts totalling 0.50-0.75% by year-end.

This scenario would ease monthly repayments by $200-400 for typical mortgage holders, improving affordability and buyer confidence. However, if inflation proves stubborn or global economic conditions deteriorate, rate cuts may delay into 2026.

Commonwealth Bank economists project house price growth of 3-4% nationally, while Westpac suggests 2-5% depending on rate movements. ANZ’s forecast sits at the lower end—2-3%—citing ongoing affordability constraints and potential economic headwinds.

The consensus view: 2025 will deliver stability rather than dramatic shifts, with location-specific variations determining individual market outcomes.

Key Factors Shaping the Housing Market in 2025

Multiple forces interact to determine where the Australian housing market in 2025 ultimately lands. Understanding these drivers helps buyers and investors make informed decisions.

1. Interest Rates and Inflation

The RBA cash rate remains the single most influential variable. Current settings at 4.35% translate to variable mortgage rates near 6.5-7.0%, well above the 2-3% rates borrowers enjoyed during 2020-2021.

Every 0.25% rate cut reduces monthly repayments by approximately $75-100 on a $600,000 loan. For many households at their borrowing limit, even small reductions restore purchasing power and improve market sentiment.

Inflation tracking matters equally. If wage growth continues at 3-4% while inflation falls to 2.5-3.0%, real purchasing power improves and housing demand strengthens. Conversely, if inflation remains sticky above 3.5%, rates stay higher for longer and market activity stalls.

Fixed-rate mortgage expiries present another consideration. Approximately 800,000 borrowers rolled off ultra-low fixed rates during 2023-2024, facing payment increases of $500-1,000 monthly. The majority of this cohort has now adjusted, but any additional financial stress could trigger distressed sales in vulnerable pockets.

2. Supply and Construction Trends

Australia’s housing shortage deepened throughout 2024. The National Housing Accord targets 1.2 million new dwellings by 2029, requiring approximately 240,000 completions annually. Current delivery sits around 160,000-180,000 dwellings per year—a persistent 60,000-80,000 unit shortfall.

Construction costs remain 30-40% higher than 2019 levels. Builder insolvencies stabilised after 2022-2023 spikes, but small-to-medium builders still operate under thin margins. Labour shortages in trades continue, with the Master Builders Association reporting 90,000 unfilled positions across the sector.

These supply constraints support price floors. Even if demand weakens, undersupply prevents significant corrections in most markets. Government infrastructure spending—particularly around major projects in Queensland and Western Australia—sustains construction activity but diverts resources from residential building.

State governments introduced planning reforms to accelerate approvals, including medium-density provisions in established suburbs. Implementation remains uneven, and actual dwelling completions from these changes won’t materialize until 2026-2027.

3. Migration and Population Growth

Net overseas migration recovered to pre-pandemic levels, adding 250,000-300,000 people annually. The federal government announced plans to moderate intake to approximately 260,000 for 2024-2025, but implementation details remain unclear.

International students comprise 35-40% of total migration, concentrated in Sydney, Melbourne, and Brisbane. This demographic drives rental demand, particularly for apartments near universities and transport hubs. Any policy changes affecting student visa settings could rapidly alter rental markets.

Interstate migration patterns continued to favour Queensland and Western Australia, with both states recording net inflows of 30,000-50,000 people from southern states. This population redistribution explains why Brisbane and Perth outperformed Sydney and Melbourne in 2024—a trend likely to persist through 2025.

Demographic shifts also matter. Millennials entering peak home-buying years (30-40 age bracket) create sustained underlying demand, while ageing baby boomers remain in larger homes longer due to stamp duty disincentives for downsizing.

4. Government Policies and Incentives

The federal government’s housing policy suite aims to improve access and boost supply. Key programs include:

• First Home Guarantee Scheme: Enables eligible buyers to purchase with 5% deposits, with government guaranteeing the remainder to avoid lenders mortgage insurance. Approximately 35,000 places offered annually.
• Help to Buy Program: Launches in 2025, providing equity contributions of up to 40% for eligible first-home buyers, reducing loan sizes and improving serviceability. Initial allocation covers 10,000 places per year.
• Build-to-Rent Incentives: Tax concessions for institutional investors to develop rental housing, aiming to increase supply of professionally managed rental properties.

State governments offer additional support. Victoria’s First Home Owner Grant provides $10,000 for new builds under $750,000. New South Wales removed stamp duty for first-home buyers on properties under $800,000. Queensland maintains concessions and grants targeting regional areas.

These programs help at the margins but don’t solve fundamental supply-demand imbalances. Critics note that demand-side subsidies can inflate prices if supply doesn’t expand commensurately.

Housing Affordability and Rental Market Outlook

Affordability remains Australia’s most pressing housing challenge. Median house prices sit 8-10 times median household incomes in Sydney and Melbourne—well above historical norms of 5-6 times and international standards for sustainable markets.

1. Affordability Crisis Across Capital Cities

First-home buyers face the steepest barriers. To service a median-priced home in Sydney requires household income exceeding $200,000 assuming 20% deposit and standard lending criteria. Melbourne requires approximately $160,000. Even in Brisbane and Adelaide, $120,000-140,000 annual income is necessary.

Domain’s Housing Affordability Report shows that less than 15% of properties listed in Sydney meet affordability criteria for median-income households. Melbourne fares slightly better at 20-25%, while Brisbane and Adelaide hover around 30-35%.

Regional markets offer better entry points. Cities like Geelong, Newcastle, Wollongong, and Hobart provide median prices $200,000-400,000 below their capital city counterparts, though prices in many regional centres surged 20-40% during 2020-2022.

The savings burden compounds affordability challenges. Accumulating a 20% deposit on a $1 million property requires $200,000 plus stamp duty and transaction costs—potentially $220,000-230,000 total. At a 15% savings rate, a household earning $150,000 needs 10+ years to reach this threshold, assuming no price growth.

2. Rental Market Trends

Rental stress intensified throughout 2024. National vacancy rates averaged 1.0-1.3%—significantly below the 2.5-3.0% considered balanced. Capital city vacancy rates:

2024-2025 Rental Market Snapshot

Source: SQM Research, Domain Rental Reports

Tenants in Perth and Adelaide face the most acute pressure. Rental increases of $80-120 per week across 2024 pushed many households beyond the 30% income threshold defining rental stress. Lower-income renters now commonly allocate 40-50% of income to housing.

Investor activity picked up slightly in late 2024 as yields improved to 3.5-4.5% in many markets, but remains below levels needed to significantly expand rental supply. Negative gearing changes proposed but not implemented create uncertainty that may deter new investment.

Build-to-rent developments offer hope but deliver slowly. Several major projects broke ground in 2024, but completed units won’t reach meaningful scale until 2026-2027. Purpose-built student accommodation helps in university precincts but doesn’t address broader rental shortages.

3. Regional vs Metropolitan Differences

Regional Australia experienced diverging fortunes. Mining-exposed regions in Western Australia and Queensland saw continued growth as resource sector activity sustained local economies. Towns like Mackay, Townsville, and Kalgoorlie recorded price gains of 8-12%.

Sea-change and tree-change destinations that surged during pandemic lockdowns stabilised or corrected slightly. Byron Bay, Noosa, and parts of coastal Victoria saw prices decline 5-10% from 2022 peaks as working-from-home trends normalised and interest rates rose.

Regional centres with strong employment bases and infrastructure investment—such as Geelong, Newcastle, Wollongong, and Canberra—maintained steady growth of 4-7%. These markets benefit from capital city spillover while offering better affordability.

The regional-metropolitan price gap narrowed considerably during 2020-2022 but began widening again in 2024. This pattern likely continues in 2025 as economic pressures favour job-dense metropolitan areas.

Investment Opportunities and Emerging Property Hotspots

Despite challenges, the Australian housing market in 2025 presents opportunities for informed investors willing to take long-term positions.

1. Growth Suburbs to Watch

Research from CoreLogic’s Hotspotting and PropTrack analytics identifies suburbs with strong fundamentals: infrastructure investment, population growth, affordability relative to surrounding areas, and undersupply.

Promising suburbs for 2025:

• Ipswich and Logan (Queensland): Benefit from Brisbane’s expansion, major transport projects, and relative affordability ($500,000-650,000 median prices). Population growth of 2-3% annually.
• Melton and Wyndham (Victoria): Melbourne’s western growth corridor, supported by employment hubs and rail extensions. Median prices $550,000-700,000.
• Rockingham and Mandurah (Western Australia): Perth’s southern corridor, driven by mining sector wealth and coastal lifestyle appeal. Prices $500,000-650,000.
• Morphett Vale and Seaford (South Australia): Adelaide’s southern suburbs with infrastructure upgrades and medical precinct development. Affordability under $600,000.
• Maitland (New South Wales): Newcastle’s satellite city with strong population growth and new subdivision activity. Median around $650,000-750,000.

These locations share common traits: proximity to employment centres (30-45 minute commutes), new or planned infrastructure, and prices 20-30% below their parent city’s median. They attract first-home buyers and young families—demographics that sustain steady demand.

2. Alternative Investment Avenues

Traditional house-and-land packages in growth suburbs represent one approach, but diversification strategies merit consideration.

1. Build-to-rent investments: As mentioned earlier, institutional-scale projects receive tax incentives. Individual investors can access this sector through property syndicates or managed investment schemes, though liquidity and minimum investment requirements ($50,000-100,000+) present barriers.
2. Regional commercial property: Small-format retail and office spaces in strong regional centres offer yields of 5-7%, higher than residential. Vacancy risks increase, but careful location selection mitigates this.
3. Dual-occupancy developments: Planning reforms in several states allow dual-occupancy on standard residential blocks. Investors can subdivide and build two townhouses, creating two income streams or one to occupy plus one to rent. Requires more active management but generates superior returns in suitable locations.
4. Sustainable housing developments: Growing demand for energy-efficient properties with solar, battery storage, and sustainable design features. These command premium rents (5-10% higher) and attract quality tenants, though upfront costs exceed standard builds.

3. Long-Term Outlook (2025-2030)

Looking beyond 2025, structural factors support long-term price growth. Australia’s population projected to reach 28-29 million by 2030 (from 26.5 million in 2024) requires approximately 175,000-200,000 new dwellings annually. Current supply trajectories fall short.

Assuming modest interest rate normalisation to 3.0-3.5% by 2027-2028, borrowing capacity improves and pent-up demand releases. Historical cycles suggest that after stabilisation periods, Australian housing markets typically deliver 5-7% annual growth over rolling five-year periods.

Climate risks and regulatory responses will reshape investment patterns. Coastal properties face increasing insurance costs and building standard requirements. Inland cities and higher-elevation suburbs may see relative appreciation as climate adaptation considerations influence buyer preferences.

The next property cycle peak likely arrives 2027-2029, assuming rate cuts commence 2025 and economic growth remains positive. Investors entering 2025 position themselves near a cycle trough—historically the most advantageous entry point for 5-10 year holds.

Challenges and Risks for Buyers and Investors

Balanced analysis requires acknowledging downside scenarios. Several risks could derail positive forecasts for the Australian housing market in 2025.

Key risk factors:

• Prolonged high interest rates: If inflation proves sticky above 3.5%, the RBA may hold rates at restrictive levels through 2025 and into 2026. This scenario would maintain pressure on borrowers and could trigger price corrections of 5-10% in overheated markets.
• Economic recession: Global economic weakness or domestic downturn leading to unemployment rising above 4.5-5.0% would reduce housing demand and increase mortgage stress. Forced sales could accelerate.
• Household debt levels: Australia’s household debt-to-income ratio sits near 185%—among the world’s highest. Many households carry minimal buffers. Unexpected expenses or income disruptions could spark distressed selling.
• Policy changes: Unexpected shifts to negative gearing, capital gains tax treatment, or foreign investment rules could alter investor behaviour and market dynamics.
• Oversupply in specific segments: Apartment markets in Melbourne and Brisbane show early signs of oversupply as construction completions from 2021-2022 approvals hit the market. Unit prices in some precincts already declined 3-5%.

Risk mitigation strategies:

1. Maintain cash buffers of 6-12 months expenses
2. Stress-test borrowing at 2-3% above current rates
3. Avoid highly leveraged positions (keep LVR below 70-80%)
4. Focus on locations with strong employment diversity
5. Choose properties with broad appeal rather than niche markets

Conservative investors may wait for clearer signals on interest rate direction before committing. The cost of delay—ongoing rent payments and potential price appreciation—must be weighed against purchase timing risks.

What This Means for Australians — Practical Takeaways

Different market participants face distinct considerations as they navigate the Australian housing market in 2025.

For first-home buyers:

• Government assistance programs improve accessibility—investigate Help to Buy and First Home Guarantee eligibility
• Regional centres and outer suburbs offer better affordability without sacrificing employment access
• Shared equity arrangements and co-purchasing with family members provide alternative pathways
• Don’t rush—waiting 3-6 months for rate clarity costs less than buying at a market peak

For property investors:

• Focus on high-yield markets (4.0%+ gross) to sustain cash flow if prices stagnate
• Growth suburbs in Queensland and Western Australia offer better near-term prospects
• Diversification across locations and property types reduces concentration risk
• Monitor rental vacancy rates and population growth data for early warning signals

For current homeowners:

• Refinancing remains worthwhile—compare rates across lenders to save $100-300 monthly
• Avoid over-leveraging to fund renovations or upgrades given economic uncertainty
• Consider downsizing if property no longer suits needs, but account for stamp duty costs
• Fixed-rate options at 5.5-6.0% provide certainty if variable rate volatility concerns you

Stay informed through reliable sources: RBA monetary policy statements, CoreLogic monthly indices, Domain and PropTrack research reports, and Australian Bureau of Statistics housing data. Professional advice from mortgage brokers, buyers’ advocates, and financial planners helps navigate complex decisions.

Conclusion

The Australian housing market in 2025 will be shaped by the interplay between restrictive interest rates, chronic housing shortages, and government policy interventions. Expert forecasts suggest modest growth of 3-5% nationally, but outcomes will vary significantly by location and property type.

Perth and Brisbane appear positioned for continued strength. Sydney and Melbourne face affordability constraints that may limit growth. Regional centres with strong fundamentals offer opportunities, while oversupplied apartment markets present risks.

Buyers and investors should focus on long-term fundamentals rather than short-term speculation. Australia’s growing population and undersupply support the case for housing as a wealth-building asset over 5-10 year horizons, but timing and location selection matter enormously.

Monitor RBA decisions closely—the timing and pace of rate cuts will determine whether 2025 becomes a year of renewed confidence or continued caution. Stay informed, maintain financial buffers, and seek professional guidance before making major property commitments.

FAQs

Will Australian house prices go up or down in 2025?

According to forecasts from CoreLogic and PropTrack, most experts expect moderate growth in 2025. Some capital cities like Perth and Brisbane may see price rises, while Sydney and Melbourne could experience slower or stabilised growth depending on interest rates and housing supply.

How will interest rates affect the Australian housing market in 2025?

The Reserve Bank of Australia (RBA) plays a key role. If interest rates remain steady or begin to ease, borrowing may become more affordable, supporting price growth. However, if inflation pressures continue and rates rise again, demand and affordability could weaken.

Is 2025 a good year to buy property in Australia?

It depends on your financial position and location. Many analysts believe 2025 could be a balanced year for buyers as supply improves and price growth slows. However, potential buyers should compare mortgage rates, check local market data, and consider long-term goals before purchasing.

Which Australian cities are expected to perform best in 2025?

Perth, Brisbane, and Adelaide are widely tipped as top performers due to strong population growth, job opportunities, and relatively affordable housing. Sydney and Melbourne may see more stable conditions, while regional markets could remain strong as lifestyle trends continue.

Will housing become more affordable in 2025?

Unfortunately, housing affordability is expected to remain a major challenge. Rising construction costs and limited supply continue to keep prices high, especially in major cities. Government programs such as the Help to Buy scheme and First Home Guarantee may provide some relief for first-home buyers.

 How will migration impact the housing market in 2025?

High levels of overseas migration are likely to sustain housing demand in capital cities. This can increase competition for both rental and purchase properties, particularly in Sydney, Melbourne, and Brisbane.

What are the biggest risks for property investors in 2025?

Key risks include potential interest rate increases, slower capital growth in overheated suburbs, and high household debt levels. Investors should focus on long-term fundamentals like employment growth, infrastructure, and rental yield rather than short-term price swings.

How can Australians stay informed about housing market trends?

Australians can follow official data from the ABS, CoreLogic’s Monthly Home Value Index, RBA announcements, and property reports from Domain or REA Group. These sources provide the most accurate and up-to-date insights into national and local market movements.