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Expert forecasts record high home prices in most capital cities for FY25 - featured image
By Brett Warren
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Expert forecasts record high home prices in most capital cities for FY25

key takeaways

Key takeaways

Domain’s FY25 Price Forecast Report predicts that home prices will continue to rise across Australia, with most capital cities expected to reach new record highs for both houses and units.

The price growth will be driven by strong population growth, construction challenges, and increased borrowing power.

However our property markets will be fragmented, with some considerably outperforming others.

Demand has risen as housing composition changes, demographic shifts, and robust population growth.

We have seen an increase in single-person households and a decrease in household size in general (fewer people, on average, living in each household), both amplifying housing demand, further compounded by migration.

Home building has also struggled to keep up with population growth due to the scarcity of land, weak building approvals, and high construction costs, exacerbating the existing structural undersupply.

This will lead to an ongoing limited supply of new homes on the market.

What's ahead for property in the new financial year?

Well, Australian home prices are forecasted to rise again over the next 12 months, although the pace of house price growth is expected to be slower compared to the last 2 years, according to Domain's FY 25 Price Forecast Report.

However, there will be a marginal acceleration in price growth for units in some markets.

House prices

On the house price front, Perth, Adelaide, Sydney, and Brisbane are expected to lead price gains, reaching new records.

Sunshine Coast, Gold Coast, and regional Australian house prices are also anticipated to be at record highs.

By the end of FY25, house prices will surpass $1.7 million in Sydney, and $800,000 in Perth, with both Brisbane and Adelaide likely joining the million-dollar club.

Table 1: House price forecasts by the end of FY25

House Price Forecasts by the end of FY25
Location Median Price Forecast % Change Record
Sydney $1.73m - $1.76m 6 - 8% New record
Melbourne $1.03m - $1.05m 0 - 2%
Brisbane $980k - $999k 6 - 8% New record
Perth $840k - $856k 8 - 10% New record
Adelaide $965k - $984k 7 - 9% New record
Canberra $1.05m - $1.09m 0 - 4%
Combined capitals $1.16m - $1.19m 4 - 7% New record
Combined regionals 2 - 3% New record
Australia 3 - 6%
 

 

Regional NSW

 

 

$735k - $757k

 

 

0 - 3%

New record if upper growth achieved
Regional VIC $543k - $560k -3 - 0%
Regional QLD $536k - $546k 2 - 4% New record
Gold Coast $1.08m - $1.11m 3 - 6% New record
Sunshine Coast $1.07m - $1.10m 2 - 5% New record
Source: Domain

Unit prices

Turning to unit price forecasts (Table 2 below), Sydney, Brisbane, and Adelaide are expected to lead price gains.

Unit prices across Sydney, Brisbane, Adelaide, Perth, Gold Coast, Sunshine Coast, and regional areas will reach record highs.

While unit price growth is anticipated to accelerate slightly in Melbourne and Canberra, Sydney's forecasted growth remains similar to the 2023 calendar year and FY24.

Melbourne and Canberra are the only cities where unit price growth is expected to surpass that of houses according to Domain.

Table 2: Unit price forecasts by the end of FY25

Unit Price Forecasts by the end of FY25
Location Median Price Forecast % Change Record
Sydney $838k - $855k 4% to 6% New record
Melbourne $575k - $587k 2% to 4%
Brisbane $572k - $583k 4% to 6% New record
Perth $443k - $447k 4% to 5% New record
Adelaide $509k - $519k 4% to 6% New record
Canberra $571k - $588k 1% to 4%
Combined capitals $657k - $670k 3% to 5% New record
Combined regionals 1% to 3%
Australia 2% to 4%
Regional NSW  

$591k - $603k

1% to 3% New record if upper growth achieved
Regional VIC $403k - $407k 1% to 2%
Regional QLD $438k - $442k 3% to 4% New record
Gold Coast $780k - $787k 3% to 4% New record
Sunshine Coast $747k - $754k 3% to 4% New record
Source: Domain

Drivers behind the price growth

Dr Nicola Powell, Domain's Chief of Research and Economics said that population growth, construction challenges, and borrowing power will be the key drivers behind the price growth.

She further commented:

"Demand has risen as housing composition changes, demographic shifts, and robust population growth.

We have seen an increase in single-person households and a decrease in household size in general (fewer people, on average, living in each household), both amplifying housing demand, further compounded by migration.

Home building has also struggled to keep up with population growth due to the scarcity of land, weak building approvals, and high construction costs, exacerbating the existing structural undersupply.

This will lead to an ongoing limited supply of new homes on the market."

Dr Powell also highlighted that as of 1st July, stage 3 tax cuts will mean more money hits Australian households, lifting borrowing capacity and, therefore, buying power across the country.

She noted:

"In essence, some may opt to upscale their budgets, potentially making extra auction bids.

For others, it could provide that extra borrowing capacity to bring more buyers to the market, speeding up their home ownership journey.

All three factors will play a role in further driving up Australia's home prices."

Final note...

Dr Powell commented that while the continued increase in property values is good news for Australians who own a home, we have to acknowledge that it’s becoming increasingly harder for many Australians trying to get into the property market.

She said that we urgently need more supply to balance the market and make it more affordable for Australians to own a home.

The government has made it clear that housing is a priority focus, but now we need to start seeing all levels of government and industry working together towards a solution.

She concluded:

"In the year ahead it would be good to see an acceleration in development approvals and initiatives such as incentives for construction - particularly for developers to build affordable housing where people want to live and with the infrastructure to support them.

We should also be looking for better ways to utilise existing housing stock and ensure greater housing density in the right locations.

For sellers, with strong demand and limited supply, FY25 could present a favourable time to sell.

For buyers, considering the rising prices, it's important to explore various suburb options be ready to act swiftly when you find the right property."

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.
3 comments

CAN YOU IN FUTURE PROVIDE PROPERTY VALUE INFORMATION ON A SUBURB OR LOCAL AREA BASIS, RATHER THAN A CITY , STATE, NATIONAL BASIS WHICH HAS MINIMUM VALUE.

1 reply

Perth is about to take Adelaide and its coming for Brisbane. We will get that 10% in the next 6 months notwithstanding a major event impacting the Australian economy. Watch this space!

0 replies

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