Key takeaways
Property markets are powered by a complex web of economic levers, social trends, and psychological triggers.
Migration turbocharges demand.
Think like a future buyer, where will families and downsizers want to live in 5–10 years?
Invest in areas where new supply is hard to create (due to zoning/geography). Landlocked, inner- and middle-ring suburbs win long-term.
Invest where disposable incomes are rising faster than the average, often more affluent or gentrifying areas.
Avoid blue-collar, low-growth suburbs. Target gentrifying areas where incomes outpace the state average.
Falling rates create opportunity, enter before the masses return.
Avoid relying on policy-driven demand. Invest in locations with natural, sustainable appeal.
Confidence is contagious, act when others are fearful and you’ll likely get the best deals.
What really drives property prices in Australia?
Ask 10 people and you’ll get 12 opinions, most shaped by headlines, hip-pocket pressure, or political spin.
But property markets don’t run on noise.
They’re powered by a complex web of economic levers, social trends, and psychological triggers.
As we are now moving into the next phase of the property cycle is interest rates start to fall, in buyer confidence slowly increases, strategic investors must zoom out and understand the real market drivers.
So here’s my updated list of the nine most powerful influences on our property markets, enriched with historical lessons and insights to help you make informed investment decisions for the balance of 2025 and beyond.
1. Population growth & migration: the great demand multiplier
In the year ending 30 June 2024, overseas migration contributed a net gain of 446,000 people to Australia's population.
Projections from the Australian Bureau of Statistics estimate that by the end of this decade, our population will be approaching 30 million, and there will be almost 40 million Australians by the middle of this century.
That’s virtually adding Melbourne, Sydney, and Brisbane to our population; all these people will need to live somewhere.
It is estimated we will need to build one more dwelling for every three currently existing by then to accommodate them.
Most new arrivals settle in Melbourne, Sydney, Brisbane, and Perth, and while population growth has always been a key driver supporting our property markets, the influx over the last few years has pushed our supply/demand balance off-kilter and is key to the increase in housing prices and the shortage of rental properties.
Outlook for 2025: Demand for entry-level housing and rentals will stay hot. Migrants add pressure to supply, particularly for well-located, affordable dwellings.
Note: Takeaway: Migration fuels population growth, which in turn drives long-term demand and supports both rental yields and capital growth. 
However, if you dig deeper, it’s actually household formation that is a key driver, which brings us to…
2. Demographics, household formation: the shifting shape of shelter
It’s not just how many people we have in Australia - it’s how they live.
Don’t just track population size, but how people are choosing to live.
These trends shape the types of properties that will be in the highest demand.
Today, more older Aussies are living solo or as couples in large homes, reducing housing turnover.
Meanwhile, millennials are leaving apartments and forming families, driving demand for detached homes in affordable suburbs.
While others are pooling resources – think multi-gen living, friends co-buying, or staying home longer to save.
Outlook for 2025: Demographic tailwinds are strong, especially for well-located apartments, townhouses, and family homes in more affluent, gentrifying suburbs.
Note: Takeaway: Invest with the future buyer in mind. Where will demand come from 10 years from now? That’s where today’s opportunity lies.
3. Supply constraints: the structural undersupply crisis
Australia is simply not building enough new dwellings.
Builders are collapsing. Material costs remain high. Labour is scarce. Financing for developers is tighter than ever.
Shane Oliver, chief economist of AMP, believes there is currently a shortfall of over 200,000 homes in Australia.
Outlook for 2025: Even with zoning reforms and government targets, it will take years to restore supply pipelines. Meanwhile, prices and rents will remain supported by scarcity.
Note: Investors' Takeaway: Buy in areas where new supply is almost impossible due to zoning or geography. Those markets will outperform the outer suburbs when new estates can be easily built.
4. Affordability
Affordability encompasses dwelling prices, employment rates, wages, interest rates, credit supply, GDP growth, and inflation – whether someone can afford a property is never just about the price tag attached to the home itself.
Over the last few years, the cheaper end of our housing market has grown strongly, but now affordability caps have been reached in many areas, meaning we will end up with a two-tier property market moving forward.
I believe investors should avoid blue-collar areas or young family suburbs and seek out suburbs with higher wage growth than the state averages.
These are locations where people can afford and will be prepared to pay a premium to live.
These are often the gentrifying middle-ring suburbs of our capital cities.
5. Interest rates
When interest rates fall, borrowing is cheap, repayments are manageable, buyer confidence booms, and property prices rise.
And with interest rates likely to keep falling over the next year, this is a positive for the housing market.
6. Access to credit: the true gatekeeper
Access to credit matters more than interest rates.
- Also read:Melbourne property market forecast for 2025 | Is it a good time to invest in Melbourne?
- Also read:Latest property price forecasts for 2025 revealed. What’s ahead in our housing markets in the next year or two?
- Also read:Brisbane Property Market Forecast [2025] – What’s Ahead & Where to Invest
- Also read:Sydney property market forecast for 2025. Is it a good time to invest in Sydney?
- Also read:This week’s Australian Property Market Update – Latest Data, State by State June 24th 2025
Just look back at when APRA introduced macroprudential measures in 2017, and the Royal Commission into the finance sector led to a tightening in credit availability.
These measures spelled the end of the housing boom that had occurred for a couple of years beforehand.
The fact is, people simply can’t buy properties if they can’t access the cash.
Outlook for 2025: With inflation moderating and interest rates falling, we can expect APRA to make small regulatory tweaks to lending criteria eventually and lower the 3% buffer banks have to put on prevailing interest rates.
7. Government policy & taxation: the (often misguided) invisible hand
From negative gearing and capital gains tax to land tax surcharges and planning laws, policy shifts can alter investor behaviour overnight.
At the same time, the government’s First Home Buyer incentives will add fuel to the fire of our property markets from January 2026, when first home buyers will be able to buy a home with just a 5% deposit.
Outlook for 2025: Watch for:
- Build-to-rent incentives
- Fast-tracking of medium-density zoning
- Further scrutiny of landlord tax incentives
Note: Takeaway: Policy can drive or dampen markets, but often with unintended consequences. Invest where demand is organic, not policy-reliant.
8. Wages, inflation & cost of living: the affordability pinch
People don’t buy homes with their gross income—they buy with what’s left after the weekly Coles run, petrol, and power bills.
Mortgage costs are on the way down, and wages are creeping up, but some households will be more affected by affordability constraints than others.
Note: Takeaway: Focus on locations where incomes are rising more than the state average and residents are less exposed to cost-of-living pressures.
9. Consumer confidence & media narratives: psychology over fundamentals
The eight factors I’ve talked about so far only tell half the story.
Regardless of how readily available credit is or how fast the population is growing, people’s perception of these things is just as important because we’re not just economic creatures—we’re emotional ones.
Confidence is shaped largely by media narratives.
If consumers believe the market is heading downward, it will influence their behaviour because people hold off making significant purchasing decisions like a new home or investment property at times of uncertainty.
On the other hand, it is likely that consumer confidence will increase moving forward as inflation comes under control, interest rates fall, and we experience a level of political stability.
Having said that, there will always be a continual conveyor belt of scary headlines and negative messages in the media.
Of course, this is the one factor you have some personal control over, and if you’re savvy, you could use it to your advantage to get ahead of the game.
While others sit on the sidelines, paralysed by uncertainty, your confidence in the advice you’ve received from your property strategist or other professional could see you snap up a fantastic property at a price that will seem cheap in a couple of years.
Final thoughts: The property puzzle is solvable if you know the pieces
These nine drivers don’t act in isolation.
They interact, overlap, and sometimes collide.
But when you understand how they work together, you gain the ultimate investor edge…You stop guessing and start strategising, you filter signal from noise, and you build wealth that endures market cycles, media panic, and policy shifts.
I genuinely believe we’re in one of those rare moments …a narrow window of opportunity before the next stage of the property cycle takes off.
Here’s what I’m seeing right now:
- Interest rates are going to fall further, triggering another surge in buyer demand.
- Population growth is surging, but construction simply isn’t keeping up.
- Government grants and incentives are about to be released for home buyers, creating a surge in demand.
- And across the country, we’re seeing rising auction clearance rates and price growth.
Fact is….the smart money is already on the move.
But what about you?
Are you clear on how to take advantage of these market conditions — or are you still waiting for "certainty"?
That’s where our Complimentary Wealth Discovery Session comes in. We’re offering you a 1-on-1 chat with a Metropole Wealth Strategist to help you:
- Clarify your financial goals
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- Get ahead of the curve — before everyone else piles in
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I’ve seen this play out before…
- In 2008, during the GFC
- In 2019, when the market bounced after the election
- And in 2020–21, as savvy investors jumped in early while others hesitated
Each time, those who acted before the media caught on made the biggest gains.
Let’s make sure you don’t miss out this time.
Don’t let uncertainty hold you back — let's build your wealth with a strategy tailored to you.
