What lies ahead for our property markets in 2025?

Melbourne was the only capital city where property prices fell all last year, and Perth was the only capital city where they consistently rose.

How will our housing markets perform this year?

Property market analyst John Lindeman reveals which indicators point the way forward.

Some key housing market indicators look into the future rather than the past and to show you how they work, I use the analogy of a plane flight where the aeroplane represents our property market and the passengers are potential buyers and sellers.

The take off

As the plane prepares to take off, everyone on board is looking forward to their destination, catching up on some work during the flight, enjoying a rest or the in-flight entertainment.

A few optimists might even be looking forward to the in-flight food.

In the property market, sellers are confident that properties will sell quickly for a good price and investors are confident that prices are about to increase.

Optimism is high with both sales and listings rising.

The inflight safety demonstration

Now we’re in the air.

Uh oh!

Thanks for reminding us that things can go wrong.

We have to assume the crash position, learn how to use oxygen masks and see where the emergency exits are.

We are even shown how to don life vests equipped with a light and whistle.

It’s not comforting to know that disaster could strike – not comforting at all.

This uncertainty about the future also occurs in property markets and when it does, potential buyers and sellers pull back, so that sales and listings both start to fall.

We brace for the worst, but will it occur, or will we land safely?

The crash

Unfortunately, a few flights do end in disaster, and this also sometimes occurs in property markets when demand collapses.

Such events are rare in our history and have only occurred at the end of speculative investor-led buying booms that were unsupported by genuine housing demand.

Everyone tries to sell and no one is buying.

In other words, as sales drop, listings rise dramatically.

Property prices fall, and many investors are ruined.

The safe landing

Luckily, virtually all flights end with a safe and happy landing.

The passengers are now excitedly looking forward to their holidays, business meetings, catching up with friends and family or simply arriving back home again.

In the property market, such times herald the start of a real boom.

Prices are shooting up as sales increase and it’s hard to find properties listed for sale because buyers are snapping up properties as soon as they go on the market.

Which signals tell us when we are heading?

The two indicators that show us where any property market is poised are sales and listings.

They are both easy to find for any area, with annual sales published free of charge by major data providers and the number of listings available from either of the two major online listing sites.

Because sales indicate the level of demand, while listings reveal the amount of supply, we need to use them together to tell us whether property markets are confident, concerned, crashing or booming.

It’s their trend over several months that indicates where we are heading:

So what will happen next?

Our database shows that sales and listings in virtually all our major property markets have both been falling in the last few months and as you can see from the above example, this means that potential buyers and sellers are becoming concerned.

The reason for the fall in confidence is simply that interest rates have remained too high for too long.

If the RBA delays cutting interest rates, housing prices in the most exposed markets could start to crash, but if the RBA cuts rates early this year then confidence will be restored and growth will return.

About John Lindeman John Lindeman has well over a decade of experience researching the nature and dynamics of various types of assets at major data analysts and is a leading property market researcher, author and commentator. For more information visit Lindeman Reports.