What's next for Australia's three largest city property markets?

Immediately following the announcement of the federal election there was a temporary lull in market activity but in the subsequent weeks the property market regained momentum.

This uptick in activity defied the usual slowdown associated with the arrival of winter. 

Buyer and Investor sentiment has been notably influenced by the Albanese Government’s policy initiatives.

The introduction of a 20 per cent HECS-HELP debt discount and allowing banks to exclude student debt in mortgage assessments are expected to enhance young buyers’ borrowing power, potentially increasing home prices by 8 to 15 per cent.

These policies have raised concerns among many investors.

Investors with a high superannuation balance are being singled out by the Labor Government with their proposed superannuation tax targeting unrealised gains on balances over $3 million. If this policy comes to light, it could materially impact more than 100,000 investors.

Potential changes to capital gains tax, such as reducing the 50 per cent discount on long-term held assets, would also diminish investor returns.

Sydney

Sydney’s property market demonstrated notable resilience in the lead-up to the election, with median dwelling prices reaching a new peak of $1,118,000 in April 2025.

The momentum can be attributed to the RBA’s decision to cut interest rates earlier in the year, alongside speculation from economists that we are likely to see up to four more interest rate cuts this year.

The speculation of further rate cuts only adds fuel to the fire, as buyers want to purchase before the market really takes off. As history has shown, a reduction in interest rates will spark more buyer activity and subsequent property price increases.

The supply constraints are evident, particularly in Western Sydney where building and construction has only produced 22.5 per cent of its annual housing needs, a shortfall common among high demand, family orientated regions.

To further appease property buyers, the Labor Government will reintroduce the First Home Guarantee Policy (effective 1 January 2026), which allows first-time buyers to purchase homes with a 5 per cent deposit should they meet certain criteria.

This policy too could have the adverse effect of driving prices up further in the price range preferred by first home buyers, as this portion of the market experiences increased demand.

Melbourne

In the week following Labor’s decisive 3 May election victory, auction clearance rates in Melbourne surged to 74 per cent—the highest in two years.

Melbourne has recorded the biggest acceleration in property prices of any capital so far this year (as of April 2025). PropTrack’s March Home Price Index revealed the city’s home values rose by 0.7 percentage points in the first quarter of 2025 after falling 1.3 percentage points in the December quarter— the fastest acceleration in property prices nationwide.

But when we reflect on the rolling 12 months to March 2025, Melbourne’s median dwelling price fell by 2.3 per cent, making it the only city with negative annual price growth, according to PropTrack.

This positions Melbourne in prime position for investors to take advantage of underpriced properties when Melbourne rebounds from the bottom of their property cycle.

The city endured a massive hit to the property market after the Victorian State Government took drastic measures during the Covid years.

We are, however, now seeing buyer enthusiasm return. This rebound has come off the back of improved consumer sentiment, easing living costs, and stable labour markets and we are expecting the moderate gains in the Melbourne property markets to continue.

Brisbane

Brisbane has been closely watched by investors because they are hosting the 2032 Olympics, which brings with it a lot of infrastructure spending and improvements.

April, however, still presented a much quieter period, with activity easing due to school holidays, the Easter long weekend, and the lead-up to the federal election.

Now we are post-election, the landscape in Brisbane is presenting many opportunities for growth.

The city is expected to benefit from Federal Government policies and expanded homebuyer support schemes are likely to further bolster demand in a market where affordability remains a concern.

Many experts are expecting Brisbane’s property market to maintain a moderate growth trajectory in 2025, particularly with the ongoing undersupply of housing continuing to exert upward pressure on home values.

The Sunshine Coast has seen a surge in property interest following the completion of the $1.8 billion Bruce Highway upgrade. This project not only improved connectivity to Brisbane but also enhanced the region’s appeal for remote workers and lifestyle-driven buyers.

Market outlook for 2025

Property markets are expected to go through a period of adjustment and growth throughout the rest of the year.

The re-election of the Albanese government and the introduction of supportive policies for first-time buyers will drive demand, particularly in the lower to mid-price range. The present challenges of affordability constraints, housing supply issues, and the threat of changes to taxation policies will continue unabated.

Policies targeting capital gains, superannuation, alongside the constant speculation around changes to negative gearing benefits will always be back of mind for investors who will likely tread with caution.

In Sydney, the combination of policy initiatives and sustained demand is expected to drive price growth, particularly in the markets favoured by first-home buyers.

Melbourne’s market is primed for investors and there is anticipation around Melbourne’s expected reemergence as a growth market.

Brisbane’s property market is poised for moderate growth, bolstered by policy tailwinds and ongoing undersupply with the Olympics boosting investor sentiment.

The federal election has brought to the forefront the importance of staying informed about policy developments and key market trends. If you are thorough with your market research, will find valuable opportunities in the post-election markets.