Key takeaways
Dr. Wilson forecasts a national property value increase of approximately 5% in 2025.
Higher interest rates will likely stabilize, with potential rate cuts anticipated in late 2025, sparking renewed market activity. The RBA is expected to delay rate cuts until sustained underlying inflation drops to 2.5%, likely in the second half of 2025.
Low unemployment, high participation rates, and strong jobs growth underpin the housing market. High immigration rates add pressure to already constrained housing supplies, maintaining high rents and low vacancy rates.
High rents and strong returns will continue to attract buyers and investors to the market.
As we peer into the crystal ball of Australia’s property markets, 2025 holds both predictable patterns and unexpected twists.
In today’s Property Insider chat, Dr. Andrew Wilson shares his expert analysis, highlighting which cities are poised for growth and which might hit a plateau.
But before we share our thoughts for 2025, it is worth remembering that while Dr Andrew Wilson‘s predictions were pretty accurate last year, most market forecasts are wrong.
Just look at all those predictions of the many “cliffs” that did not occur.
The lesson is that making long-term investment decisions based on short-term concerns is not a recipe for success.
No doubt 2025 will bring its own events that will dominate our lives and financial markets for a few months – for example the upcoming federal election.
So we recommend you prepare yourself for the continual barrage of messages from the media and see these as distractions from the long-term focus successful investors should have.
2024: a year of consolidation
Watch this week’s Property Insider Video as Dr. Andrew Wilson reflects on 2024 and describes it as a year of consolidation.
The property markets regained and built upon the losses of previous years, with a stabilising effect following the interest rate hikes in 2022.
However, our housing markets were fragmented with Brisbane, Perth, and Adelaide continuing their strong performance and contributing significantly to the overall national house price increase of 6.9% .
Sydney displayed steady growth, though it began to encounter the upper limits of affordability, which moderated its price growth in the last quarter of the year.
And Melbourne lagged behind other major capitals, still seeking to rebound and revitalise its market confidence, which has been affected by previous harsh lockdowns and ongoing state government policies.
Watch this week’s Property Insider Video as we give our thoughts as to why the Melbourne market has stagnated and what’s likely to make it rebound.
The following chart from My Housing Market shows that national unit prices were steady at $662,790 in December compared to November.
The national unit price, however, rose 5.6% higher over the year.
Predictions for 2025
According to Dr Wilson, 2025 will likely continue to produce strong results in the boom-time markets of Brisbane, Adelaide and Perth, although price growth will be lower than 2024.
Sydney will continue to report solid results, and the Melbourne market is likely remaining in the doldrums and awaiting a lift in confidence - particularly in the inner-suburban prestige markets that have continued to be local regional underperformers.
- Also read:National home values hold steady as regional Australia pushes to new record highs
- Also read:Home Prices Start 2025 Lower | Latest Housing Market Stats Dr.Andrew Wilson
- Also read:Australian Property Market Forecast for 2025: Insights from Dr. Andrew Wilson | Property Insiders
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – January 2025
- Also read:Adelaide housing market update | December 2024
Underlying drivers will continue to support housing market activity nationally with the spectre of higher interest rates eventually easing with recent headline inflation falling sharply, although underlying inflation (the measure that the RBA prefers) remains well above the RBA target range.
However the prospect of a rate cut in 2025 remains, which will clearly act to refuel housing market activity and generate higher home prices.
Watch this week’s Property Inside video chat and hear Andrew explain the RBA’s requirement for a sustained period of underlying inflation at 2.5% before considering rate reductions, a scenario he believes is unlikely until at least the second half of 2025 or beyond.
This steady interest rate environment suggests that local economic factors, such as employment and migration, will predominantly drive the housing market.
Having said that, the national economy is still strong, with continuing low jobless rates, high participation rates and surging jobs growth driving solid wage increases, despite strong immigration providing even more people looking for jobs.
Over the short term continued high migration will add to current chronic housing undersupply, supporting high rents and low vacancy rates in capital city rental markets - although early signs of rising rental supply and reduced tenant demand are now emerging.
High rents and higher prices generally, however, are providing clear incentives for first-home buyers and particularly investors chasing solid investment returns.
Investment opportunities and rental market trends
Despite the overall market stability, Dr Wilson highlights the potential investment opportunities, particularly in the Melbourne property market.
Melbourne has been underperforming for the last few years and offers potential for future growth as it gradually recovers.
Currently established Melbourne houses and apartments can be bought significantly below replacement cost, meaning they can be bought with substantial “intrinsic value.”
In terms of rentals, the market has reached affordability limits, and that’s why rental growth is slowing, but the current low vacancy rates will continue to support moderate rental growth.
Looking forward: stability and local factors
For 2025, Dr. Wilson predicts that the housing market's dynamics will largely hinge on local factors rather than national economic shifts.
This means that growth will vary significantly between regions, influenced by local demand and supply, migration trends, and state-specific policies.
The following chart shows Dr Wilson ‘s housing market predictions for each state for both houses and units.
Overall, Dr. Wilson sees national property values increasing by around 5% over 2025.
As we navigate the housing markets in 2025 Dr. Andrew Wilson's forecasts paint a picture of a property market that is as dynamic as it is diverse.
And each week, we will return with a Property Insiders chat to keep you informed and give you some clarity on the chaos of the many mixed messages the media is offering you.
