Will property prices rise in 2025 and, if so, where?

The heat came out of the national property in 2024, with price growth easing from 6.9 per cent in 2023 to 5.5 per cent for the first 11 months of this year, according to PropTrack.

So, will 2025 show a reversal of what seems to be downward trajectory, or will there be another uptick possibly driven by reduced interest rates, a stabilised economy or return to wages growth and lower inflation?

The wildly different performance of the major capital city and regional markets shows that there is no uniform national property market. Perth’s property market grew at 21 per cent over the past 12 months, while Melbourne’s declined by 2.3 per cent, according to CoreLogic.

Affordability has been sorely tested too, with the median dwelling value reaching $800,000.

So how do the people who make a living from advising on all things property see the national real estate picture developing in 2025?

The PropTrack Property Market Outlook Report December 2024 released Wednesday (18 December) expects the national capital growth figure to dip again in 2025 to 4 per cent.

I’d warn borrowers against jumping into a fixed rate too soon.

- Andrew Mirams, Intuitive Finance

REA Group Director of Economic Research and report author, Cameron Kusher, said Australia’s property market has shown unexpected resilience in 2024, with home prices rising nationally despite varied performance across the country and an influx of new properties hitting the market.

“The increase in available stock has boosted sales volumes but also led to softening demand, which has been a contributing factor to slowing price growth.

“With more options, buyers face less urgency to purchase, and properties are spending a longer time on the market.

“With price growth moderating, stock levels rising, and the expected timing for interest rate cuts delayed, we anticipate weaker price growth compared to recent years.

“Adelaide and Perth are anticipated to lead price growth, while Melbourne could experience a price decline of as much as 1 per cent.”

Is it Melbourne, Darwin's time?

Opinions vary on which cities will lead the charge in 2025, from those arguing Perth is overheated to others saying Melbourne’s underpriced market is ripe for a recovery. And there’s no shortage of voices arguing the opposite.

Mike Mortlock, Managing Director, MCG Quantity Surveyors, leant towards a continuation of growth in two of the premier 2024 performers.

“Perth and Brisbane are expected to continue outperforming national averages, although an anticipated increase in listing volumes may temper the feverish buyer activity observed recently.

“This adjustment could bring more balance to these markets.”

Many investors are now exploring markets like Melbourne and Darwin in search of the next big opportunity.

“While some of these markets still offer favourable income-to-asset price ratios, there is a risk of prolonged stagnation or even decline in others,” Mr Mortlock said.

He also played down the significance of interest rates compared to a few other variables.

“More impactful than rate cuts may be a recalibration of APRA's serviceability buffer, which was raised from 2.5 per cent to 3 per cent in October 2021 to curb risky lending.

“Demographic shifts will be a key factor in 2025, particularly the influence of baby boomers, who comprise 21.5 per cent of the population or 5.6 million individuals.

“Demand for high-quality downsizer housing stock is set to grow, and government incentives encouraging downsizing could unlock larger homes for young families.”

Melbourne’s status as the potentially sleep giant of Australian property was also on the mind of Michael Pell, Managing Director, Propell Property.

“There are multiple reasons why the Melbourne market is so depressed, with the new land tax regime a big reason why, with the policy set to remain in place for a decade.

“Purchasing counter-cyclically is often a smart property investment strategy, however, there must be a number of market fundamentals to support future capital growth as well.

“Rather than relying on market conditions to do all of the heavy lifting – which may take some time in Melbourne given the current policy handbrakes – savvy investors can create their own capital growth by constructing new dwellings, such as duplexes.”

Regional markets outperforming capitals

Regional property prices outpaced the capital cities in 2024, growing at 6.0 per cent over the past 12 months compared to 5.4 per cent, according to CoreLogic.

Buyers Agent Kate Hill, or Adviseable, said e a number of markets around the nation that performed well in 2024 and are set to do so again in 2025.

“One of these is the Central Coast of NSW, which has always appealed to Sydneysiders seeking an affordable lifestyle, but its property market leans more towards being a consistent than a booming market.

“A major bonus for investors in the Central Coast market is its low vacancy rates.

“Likewise, the property market in the Redlands region of Greater Brisbane has experienced robust growth over recent years, however, it still remains relatively affordable compared to other parts of Brisbane.

“Another location is Geelong, which has a rapidly growing economy, with billions of dollars in recent infrastructure expenditure as well as billions more in other major investments in the years ahead.”

Andrew Mirams, Managing Director, Intuitive Finance, said he expected to see a first rate cut of 0.25 per cent between April and August and another 0.25 per cent after that.

“As soon as we see rates cut, property markets will improve around the country, despite the continued high three per cent serviceability buffer that’s applied to all loans.

“I’d also warn borrowers against jumping into a fixed rate too soon.

“In a reducing interest rate environment, the banks are very good at throwing out ‘fixed rate lures’,” he said.