By Michael Yardney January 28, 2025

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The five property predictions for 2025 that most experts will get wrong

Property Investment
The five property predictions for 2025 that most experts will get wrong

Key takeaways

Despite access to extensive data, many forecasts will miss the mark, largely due to unpredictable factors like investor sentiment. Investor sentiment, currently at historic lows, will remain a critical, yet hard-to-quantify, influence on market movements.

Unforeseen events, or "black swan events," will shape the market unpredictably, as they do every year. Examples from 2024, like prolonged high interest rates, economic stagnation, and global conflicts, underscore how predictions often miss such impactful developments.

A handful of forecasts will hit the mark, often by chance. Those who get it right will claim expertise, but true forecasting success is rare and inconsistent.

Many property investors fail to benefit from long-term wealth creation: 20% sell within the first 2 years; 50% exit within 5 years, missing the compounding benefits of strategic property ownership. Waiting for the "perfect time" to invest often proves to be a mistake.

Savvy investors who act during quieter market conditions and focus on "investment-grade" properties in prime locations will thrive.

About this time each year it’s customary for those of us in the property industry to peer into the future in an attempt to predict what’s ahead for our housing markets.

While making such forecasts is not an exact science, I can safely make five predictions I am certain will be true for 2025.

1. Most predictions will be wrong!

My first prediction for the year is it will be a bad year for those in the prediction business.

I’m sure this will be correct as most economic and property experts get it wrong despite being armed with all the research available in today’s information age.

The problem is while the fundamentals (things such as population growth, supply and demand, employment levels, interest rates, affordability and inflationary pressures) are easy to monitor, one overriding factor the experts have difficulty quantifying is investor sentiment.

Currently, investor sentiment is low, in fact, it’s the lowest it’s been for decades, despite the economic fundamentals being quite solid.

2. Many things won’t happen and others will

Many of the predictions for 2025 won’t happen and a lot of things will happen this year that no forecaster thought to include in their predictions because market movements are far from an exact science.

Every year there is an ‘X factor’ — sometimes called a ‘black swan event’.

This is an unpredicted factor, either locally or from abroad, that affects our markets either positively or negatively.

However, in retrospect, these unexpected events will seem to be the obvious consequences of the current economic and political environment.

Last year no one really predicted that interest rates would remain so high for so long, or that we would be in a per capita recession for 7 quarters, or that the cost-of-living crisis would affect so many Australians.

And very few believe the wars in Ukraine or the Middle East would last so long, and I won’t even mention the predictions about the next American president.

3. Some forecasts will be right

I predict a small number of the many economic and property forecasts for 2025 will accidentally come true and those who randomly predicted them will claim to be experts, despite the fact it was the first time they got one of their hundreds of forecasts right and that they adjusted their forecasts over the year as circumstances unfolded.

4. Most property investors will get it wrong this year

This one is simple because they always do!

And I’m not talking about those who fail to take action this year and wait for things to be just right before they get into the market, even though that will be a big mistake this year.

What I’m talking about is based on data that shows 20% of those who do invest in property sell up within the first 2 years and around 50% sell within the first five years.

These failed investors will never gain the long-term wealth-creation benefits that property investing is all about.

5. Those who get it right will do very well

And my last prediction is those property investors who get it right will do very well out of real estate this year and set themselves up for the years ahead.

Those who saw previous quiet spells in the property market as a countercyclical opportunity have consistently done well for themselves.

They recognise the slower market as a chance to invest when others are too afraid to buy and when there are more willing sellers in the market than purchasers.

However, not all investors who buy during the downturn will get it right.

That’s because you can’t just buy any property and expect it to outperform in the long term.

The key is to buy the right type of property, in the right location.

At this time in the cycle, correct asset selection will be critical.

You need to buy an ‘investment-grade’ property below its intrinsic value and one that has a ‘twist’.

There needs to be something special about it — like value-add potential that allows you to manufacture capital growth through renovations or redevelopment.

Ideally, you should look at purchasing in the inner or middle-ring suburbs of our major capital cities in locations that have a historical pattern of above-average capital growth, regardless of the ups and downs of the property cycle.

Why?

Because the value of property in good locations will continue to increase in the future due to scarcity.

And when interest rates eventually fall and consumer confidence returns, an improving economy, jobs growth, population growth, the shortage of the right type of property as well as significant infrastructure spending will all have a positive impact on this type of property.

A few more property predictions for 2025

The upcoming federal election will ensure that immigration, housing affordability and the cost of living will remain in the news.
It will be a year of 2 halves – with a quieter first half and then the property markets will rebound when interest rates start to fall later in the year.
Vacancy rates will remain low, and rents will keep growing, albeit more slowly than in the last few years, as rental affordability has limited the capacity of many tenants to pay more.
State governments will continue to introduce legislation favouring tenants and taxing property investors, which will continue to motivate some investors to sell up – thereby making the rental shortage worse.

So the big question is …

What will 2025 bring your way in terms of wealth creation and the property markets?

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.