State by state: what to expect in property markets around Australia in 2025

As we move into 2025, the Australian property market is poised for another dynamic year, with price increases driven by anticipated interest rate cuts, housing undersupply, and strong buyer demand, providing an exciting chapter for both home buyers and investors.

According to Domain’s Property Price Forecast Report FY2025, average house prices across the country are expected to increase between 4 and 6 per cent in 2025 but, this is a national average only and doesn’t mean that all properties across the country are guaranteed to rise.

We are expecting to see a lot of variation in the market performance across states and territories, cities and suburbs.

Around the states

New South Wales

Sydney: increases 4-6 per cent (houses and units)
Sydney is expected to continue in 2025 as buyers’ market, which is great news if you’re a first home buyer.

An increase in listings will put downward pressure on prices, however, there is still a low level of building approvals that will cushion any potentially large price falls in Sydney’s housing market.

We aren’t expecting huge price increases across Sydney, but suburbs such as Tempe, Arncliffe and Rockdale that are benefiting from major infrastructure projects, like the newly completed transport link of the Sydney Gateway, could be ripe for growth.

Regional: It’s the affordability of the South Coast beach side suburbs like Shellharbour and Sanctuary Point that are likely to see the solid growth as lifestyle takes priority.

Queensland

Brisbane: increases 5-7 per cent (houses), 7-9 per cent (units).
Brisbane property prices surged by 12.1 per cent in 2024. While growth may moderate, Domain forecasts house prices will rise by 5-7 per cent and apartments by 7-9 per cent in 2025.

The 2032 Olympics-related infrastructure boom will continue to attract investors but this really comes as no surprise as we have been seeing this since March 2020. Brisbane’s capital growth exploded to 50.2 per cent, fuelled by population growth and more affordable housing opportunities.

The Queensland Government has forecast that by 2046 an additional 500,000 people will have moved into the Brisbane City Council area, increasing the population to 1,721,000 and a total of 2.2 million people calling south east Queensland home. The population is projected to reach 6 million people by 2046.

I am keeping a keen eye on the Brisbane suburbs of Coorparoo (6.7 per cent growth since February 2024) and Springfield Lakes (17 per cent growth, since February 2024, and 20 per cent over the past two years).

Regional: Noosa Heads (25 per cent growth in past 12 months) and the Moreton Bay region (lower side, areas like Wynnum, Manly, and Manly West) that have seen an average of 13 per cent growth in the past year, appeal because this area appears to be on a steady growth trajectory when looking at the previous two years’ growth rates and the 10 year average annual growth rates.

Victoria

Melbourne: -1-4 per cent (houses), -2-0 per cent (units)
Melbourne has been one of the weakest performers but we are expecting to see some modest growth in 2025. For buyers this might be the time to get into the market and buy, particularly if you are able to hold the property for the long term, or are adding a long term growth property to an existing portfolio that is already cashflow positive and positively geared.

I predict it is currently undervalued and a lot of investors are blind to the future potential.

Frankston has shown some resilience with a 1 per cent increase in prices in the past 12 months. It is popular with families and has been gentrifying.

Regional: Geelong has seen a 12 per cent increase in prices in the past 12 months, which is really going against the grain but this is likely because it is a major hub and due to its popularity, proximity to Melbourne, and available amenities.

Western Australia

Perth: Increases 8-10 per cent (houses and units)
Somewhat of a battleground for investors in 2024, Perth showcased a lot of potential. Investors flocked to get a piece of the 20 per cent+ annual dwelling price increases fuelled by a cocktail of increasing population (including a lot of domestic migration), limited housing supply, and relative affordability compared to other Australian capital cities.

The demand for housing greatly outweighed the supply and the pressure on prices was further heightened with Western Australia’s growing economy attracting even more people into the region.

The main risk when buying in Perth is whether a lot of the growth has been fuelled by investors buying up, rather than owner occupiers.

When a lot of investors flood the market, they typically will want a well-priced property for their money that may not necessarily be in the best location if you want to actually live there. With prices rapidly rising in the west, you must consider whether it has reached its peak.

Innaloo has been a favourite and has already seen a 23 per cent rise in prices in past 12 months. I would consider Armadale in Perth’s south-east because it is 25km from Perth CBD and is a self-contained suburb that is one of the country’s fastest growing Local Government Areas (LGAs).

It is within reach for workers of a hefty industrial presence on the coast that includes a $4 billion container port, a $1 billion hydrogen plant, a $635 million rail line and station, and a $4.3 billion shipbuilding project.

Regional: Geraldton might be a good pick because of its affordability ($386,000 median house price), 20 per cent growth in past 12 months, 12 per cent average annual growth rate (10 year average) and 6.5 per cent median rental yield. But only invest here with consideration to whether it might have already peaked, as timing is key here.

South Australia

Adelaide: increases 7-9 per cent (houses and units)

Adelaide’s market has been one of the best performers, with house prices rising 14.4 per cent in 2024. Growth is expected to continue at a 7-9 per cent rate in 2025.

Adelaide has grown in popularity due to its lifestyle appeal bringing in both owner-occupiers and investors.

In 2024, the State Government released a 30-year plan for Greater Adelaide, earmarking 36 per cent of all new housing growth in the northern suburbs.

The population growth is set to continue steadily and sustainably to grow by a further 200,000 people over the next decade. But, the main risks that could stall Adelaide’s price growth are how the government handles the city’s water infrastructure delivery plan issues, and the development of the CBD, such as the Keystone Tower development.
Tea Tree Gully, Holdfast Bay, Salisbury, Mount Barker and Playford council areas are likely to see strong demand, particularly if you’re looking to maximise future capital growth.

Alongside the rental market metrics, vacancy rates, yields, the due diligence on these suburbs looks promising for prospective buyers.

Regional: Port Lincoln has had a close to 10 per cent average annual growth rate over the past 10 years, and a 12 per cent growth over the past 12 months.

The rental yields at 5 per cent are good for investors looking for a growth suburb, and the average house will set you back around $465,000. Port Lincoln is the southernmost tip of South Australia’s picturesque Eyre Peninsula and has long been known for its fisheries but it is also home to 50 per cent of the state’s wheat, barley, and oil seed production and a total $3.2 billion worth of exports are sent to domestic and international markets per year.

In the pipeline, there are signs of a transformation, with the new Lincoln Cove marina, a $290 million renewable energy power project, and a $300 million mixed-use project that includes a new base for the local fishing fleet.

What’s ahead for 2025?

While the outlook is largely positive, the market will likely encounter several hurdles:

1. Affordability concerns

Despite softening growth rates, housing affordability will remain a critical issue, not only for home buyers but also for renters, with rents skyrocketing over the last few years as vacancy rates hit historically low levels.

2. Construction bottlenecks

While the government is encouraging the construction of 1.2 million new dwellings in the next five years, labour shortages and rising costs will continue to delay new housing projects. So far, the government has not hit the targets for number of dwellings to be built in the period, and this shortfall cannot be easily rectified.

3. Regulatory changes

Ongoing debates about taxation policies, such as stamp duty reforms, and potential changes to negative gearing could influence market dynamics. Any further interference to residential tenancy regulations by state governments, which have already scared off many investors, will also have an impact.

Key trends to watch in 2025

Interest rate cuts

Lower rates will increase borrowing capacity and demand. This will likely be a huge influencer for affordability especially for existing mortgage holders.

Affordability and the cost of living are coming to a boiling point where mortgages are concerned because this is the major spend for most household budgets.

There is an expectation that rates will be cut soon and a lot of families are holding their breathe until this time to get some relief on their cost of living.

When the interest rate cuts do come, although borrowing capacity will be increased this does not mean buying property will be more affordable. Perhaps the opposite is true.

A drop in interest rates will encourage more buyers into the market, increasing demand for property and driving property prices higher.

A better plan would be to get into the market now, while it is still a buyer’s market and negotiate a good price, then when rates drop your interest repayments will be lower. If you sit and wait for the rate cuts, it is likely you will be buying in a more competitive market.

2. Rental market strength

With tight rental supply, investors will continue to see high yields. Landlords are able to survive in the current market because the tight rental market is assisting landlords to be able to charge a rental amount that can help cover the mortgage repayments, and it is the tenants that are bearing the brunt of the higher interest rates.

3. Government policies

Reforms on negative gearing, stamp duty, and incentives for first-home buyers could impact demand.

I don’t really see any changes coming to negative gearing in 2025, only more discussion and speculation. Government policies should focus more on increasing housing supply as well as creating greater affordability for first home buyers.

There is one reform being discussed by the NSW Government for off-the-plan contracts that we are really interested in seeing in 2025. Under the proposed reform there could be financial penalties on developers who fail to deliver homes or exploit buyers.

4. Construction challenges

A lack of new housing developments could keep prices high​. The ongoing problem of limited housing supply remains — the low number of dwelling approvals each year and challenges faced in the construction sector are also likely to keep property prices high.

There were 163,760 total dwelling approvals in the 2024 financial year, far below the National Cabinet’s goal of building 240,000 new homes each year to meet Australia’s rapidly growing population and demand for housing.