What’s in store for the residential property market in 2025?

Google must be having a helluva time fielding queries about Australia’s residential market in 2025. Existing residential property owners and investors want to know whether the astonishing price growth will continue, while those unlucky to secure a home want to find a window of opportunity to finally end their house hunt.

2024 is now nearly behind us. It’s been an incredible year for some (i.e. those who own high-quality homes) and a challenging one for many (i.e. those looking to put a roof over their heads), and understandably both parties want certainty around the future.

Now look, we’re the first to admit we don’t have a crystal ball. But we do have a collective 60-plus years of experience as property investors. We’ve seen cycles come and go and witnessed predictions eventuate and falter. All of that aside—and after last week sharing our thoughts on the commercial property market in 2025—these are our predictions on Australia’s far-reaching residential market in 2025.

1. The media will speculate further about interest rate drops

It’s not that we don’t think the RBA will drop interest rates. But given how cautious the central bank has been in recent months (or years), investors must be prepared for the very real possibility of interest rates barely budging in 2025.

So—in our own seemingly cautious forecast—why have we placed “interest rate drop speculation” as a prediction?

The reason is because headlines can seriously move the needle in property markets, affecting the psyche of investors who use mainstream media as their investment compass. The more headlines push the likelihood of interest rate drops—particularly those major publications relying on clickbait—the better investors will feel about the possibility of them entering or re-entering the market.

We know this messaging will continue, perhaps confusing and frustrating investors more than providing much real confidence. Again, we’re not saying interest rates won’t drop in 2025; every Big Four bank predicts they will, between February and May 2025. We’re saying the media will continue to enjoy using the topic as a motivator to visit their site. So, be careful what you read.

2. First home buyers will continue battling against deep-pocketed investors

An interest rate drop will seemingly be good news for anyone looking to invest or acquire a home, because not only will prospective debt become cheaper but borrowing power will increase.

That means first home owners might be able to stretch their budget to a higher price echelon. But it means those players with significant capital ready to invest will also reap the rewards of higher loan sums.

This is particularly true for east coast investors looking to plant a footprint in the west. With WA residents viewing the state’s growing median property price as exorbitant, east coast investors—who’ve acquired substantial capital and equity from their own investments—still see Perth as very affordable. They’ll continue heading west until they feel WA has hit its peak.

3. The gap between east and west will widen

Perth is running its own race compared to the rest of the country. Brisbane is perhaps the only mirroring city, with their respective influxes of migrants causing a dire need for housing. Yes, mining is a big factor in the huge increase in foot traffic, and yes, mining has been the catalyst for many of WA and QLD’s housing booms in the last twenty-something years. With both markets considered very affordable in comparison to many other areas of the country, they will continue to own the spotlight of national investors.

Other capital cities don’t enjoy such upswings from their obvious lack of mining activity. Melbourne and Sydney are simply two of the most desirable places to live in the country (well, they were, depending on whom you ask) and hence enjoyed a near-guaranteed population increase every year. But the ongoing housing crisis has made living in these cities near impossible for many, pushing investors out to regional areas or to other parts of the country (like Brisbane and Perth).

4. Land may become a more viable option as unaffordability continues

A Perth real estate agent I recently spoke to said he’s seeing many buyers—after months, and in some cases years, of missing out on established homes for sale—now hoping to buy and hold land until they are able to build. Or merely hold said land in the hope that the market will continue to rise and they can divest with a decent profit.

This increase in sentiment toward buying land is oftentimes a signal that markets are headed for the peak. As you’d guess, the reason is buyers look for the options their budgets will withstand, and if they don’t see the value in postage stamp-sized apartments and units, one of their few remaining solutions is to buy a parcel of dirt.

5. The election will slow things down

Sometime in the middle of the year, we’ll choose the next occupants of Kirrilibi House. And in the leadup, when our attention is fought for by advertising campaigns and maildrops, there’s a possibility of a marked slowdown in property transactions.

Uncertainty causes investors to sit on their hands until the future is somewhat clear. We saw that both during the pandemic and while interest rates began ascending back on the 3rd of May 2022. And, even if it’s only for a few weeks, we’ll likely see uncertainty return until a new PM is selected and Australia knows which party will govern for the next four years.

---

There are so many more predictions we could make and so many more that have been made by our counterparts across the nation. At the end of the day—from our experience—success in the property market will come down to investors’ ability to apply core property fundamentals to both investments and divestments. And of course, it will likely pay to move swiftly and decisively.

Want more expert property info like this? Subscribe to receive our newsletter and you’ll join an exclusive list of investors gaining exclusive insights every month. We never spam and you can unsubscribe anytime.