Key takeaways
Interest rates are likely to ease, boosting buyer activity and improving affordability.
House prices will continue rising, albeit at a more subdued pace, driven by migration and undersupply.
Luxury property markets are growing beyond Sydney and Melbourne to include Brisbane, Perth, and regional hubs like the Gold Coast.
Regional hotspots like the Gold Coast and Sunshine Coast are no longer budget-friendly.
A two-speed market is forming, with Sydney diverging significantly from other capitals, while Melbourne faces slower growth.
Retail is set to outperform other commercial sectors, although challenges like shifting consumer behavior persist.
Secondary office spaces face reduced demand due to the shift towards hybrid work and premium locations.
Institutional caution will leave room for private investors to dominate.
Navigating the complex borrowing environment is driving more Australians to mortgage brokers.
What lies ahead for Australia’s property market in 2025?
Ray White’s 2025 Property Outlook Report highlights ten key trends set to shape residential and commercial real estate in the coming year.
Let’s break these predictions down and explore what they mean for property investors, homeowners, and the broader market.
1. Rate cuts expected in 2025
After a challenging period of interest rate hikes, Ray White anticipates the RBA will ease rates in 2025.
Of course, the name of this is to support economic recovery and restore consumer and business confidence.
For property investors, this could mean increased purchasing power.
Takeaway: Lower rates will likely boost buyer activity, because of increased affordability and will bring homebuyers and property investors back into the market, meaning competition for good properties will heat up. This also means there is a current window of opportunity to get ahead of the crowd.
2. House price growth to continue, but at a slower pace
While property prices are expected to rise, the growth will moderate compared to the post-pandemic boom.
Markets that have already slowed, like Sydney and Melbourne, might stay flat until rate cuts begin, according to Ray White.
Factors like higher migration and undersupply will still push prices up, but affordability constraints will cap the pace.
At the same time, building costs remain high, meaning fewer new houses are being built.
This pushes more buyers toward existing homes, helping support prices in established suburbs.
The lack of new supply also means any excess demand can't be easily met with new housing.
Source: Ray White 2025 Outlook Report
Takeaway: Investors should focus on high-demand areas with strong fundamentals, such as where current owners have significant equity in their properties and will not be affected by affordability issues and locations that are gentrifying where people with higher incomes are moving in and improving the suburb.
3. A shake-up in luxury property markets
Ray White notes that there are now a number of new luxury home markets around Australia not just Sydney and Melbourne.
Both Brisbane and Perth have now surpassed the $2 million mark for houses in the top five per cent, driven by impressive five-year growth rates of 55 and 53 per cent respectively and the Gold Coast and Sunshine Coast also have developed their own luxury markets.
Looking ahead, the market appears to be trending toward a new baseline, with all major cities except Darwin expected to reach or exceed the $2 million mark for luxury properties.
Source: Ray White 2025 Outlook Report
Takeaway: Prestige properties have always been a great place to live, but at Metropole, we avoid these markets as they are not what we would consider investment grade – they are too volatile.
4. Regional Australia’s $1 million club is expanding
Australia’s regional “$1 million club” has undergone a dramatic expansion growing from just two areas five years ago to encompass 20 locations today.
Leading the charge are the Gold Coast and Sunshine Coast.
The combination of lifestyle appeal and practical connectivity appears to be a winning formula for regional property market success.
Takeaway: Regional hotspots are no longer “budget buys.” This means investors need to research carefully and would most likely be better off buying in capital cities.
5. Emergence of the “Golden Arc”
The Australian housing market is witnessing a fundamental restructuring, characterised by the emergence of distinct price bands and the formation of what could be termed the "Golden Arc."
Just as with the luxury house market, Sydney continues its solitary ascent with a geometric mean house price of $1.59 million.
- Also read:Adelaide housing market update | December 2024
- Also read:Perth housing market update | December 2024
- Also read:Brisbane housing market update | December 2024
- Also read:Interest Rate Mystery: Just look what happened last week! | Property Insiders
- Also read:Sydney housing market update | December 2024
Sydney's divergence from other markets has intensified, with the price gap to Melbourne expanding from 30 per cent in 2014 to 55 per cent in 2024.
This widening chasm indicates a "two-speed" market, where Sydney operates under distinct market dynamics from the rest of the country.
In contrast to the upward trajectory of the Golden Arc, Melbourne's housing market has seen a significant decline.
Once the second most expensive market in the country, Melbourne now sits fourth, with a geometric mean house price of $1.02 million.
Over the past five years, Melbourne's price growth has been the slowest among major cities, at just 20.6 per cent.
Ray White expects several key developments.
Perth and Adelaide may surpass Melbourne in price, reinforcing the shift in the mid-market cluster.
The Golden Arc is likely to emerge with Brisbane joining the Gold Coast and Sunshine Coast as premium markets.
Finally, Sydney's isolation at the top is expected to widen, further emphasising the "two-speed" nature of the market.
Source: Ray White 2025 Outlook Report
Takeaway: While other markets are likely to act before Melbourne in the short term, Melbourne will eventually return to its rightful place as the second most expensive capital city meaning there is significant built-in equity in established Melbourne properties and substantial upside potential over the next few years.
6. Retail set to lead commercial property performance
Retail is tipped to outperform other commercial sectors in 2025 according to Ray White, marking a significant shift from recent years when industrial assets dominated commercial property markets
Takeaway: Investors in commercial property should be careful and get independent professional advice as the retail sector faces some headwinds.
The growing influence of social media marketplaces, with Facebook Marketplace activity growing 3.6 per cent annually, and Australia's ageing demographic could reshape retail demands over the next two decades.
7. The death of the secondary office market
Secondary office spaces in less desirable locations face a grim future according to Ray White.
Hybrid working models are pushing businesses towards premium, well-located offices with top-tier amenities.
Takeaway: Commercial property investors should focus on prime locations rather than buying cheap secondary properties.
8. Private investors to prop up the commercial market
Institutional investors may remain cautious in 2025, leaving private investors to dominate commercial property transactions.
This trend will likely continue until broader economic stability returns according to Ray White.
Takeaway: Private buyers could find opportunities in commercial markets, but be careful as commercial real estate needs to be added to your portfolio at the right stage of your property journey, and this is very rarely until you have a substantial asset base of residential real estate.
9. 8 in 10 Australians to use Brokers for lending
The complexity of borrowing is pushing more Australians towards mortgage brokers. With interest rate changes and tighter lending criteria, brokers are becoming essential for navigating the lending landscape.
Takeaway: Strategic investors build a team of professionals around them including an investment savvy mortgage broker who can secure the best deals and help avoid common pitfalls.
10. Rising rivalry in commercial lending
Competition among lenders is intensifying in the commercial space, with alternative financiers stepping up to fill gaps left by traditional banks. Expect better deals for borrowers but also stricter scrutiny.
Takeaway: Business owners and investors should use the services of a competitive mortgage broker to shop around for competitive terms.
What does this mean for you as a property investor?
2025 presents a mix of challenges and opportunities for Australia’s property markets.
From the emergence of new growth corridors to the shifting dynamics in luxury and commercial real estate, staying informed and adaptable is key.
