2025 Property Market Predictions: What’s Ahead for House Prices in Australia?

As 2025 draws near, property investors and aspiring homeowners alike are asking what’s next for the Australian property market. High interest rates, stubborn inflation, and regional market shifts were defining factors of a challenging year. Buyers and sellers alike are hopeful that 2025 will have exciting possibilities in a buoyant market.

2024 Property Market Trends

2024 saw consistently high interest rates and slowly decreasing inflation, while Australians battled higher living costs. As predicted last year, Brisbane and Perth prospered, while Sydney and Melbourne’s growth either slowed down or went in reverse.

While the big four banks predicted a cash rate cut in late 2024, it has yet to occur. Most major banks, with the exception of NAB, correctly guessed that the cash rate had peaked in 2023 when it was raised in November. 2024 saw a bruised economy slowly rebuild itself. While interest rates don’t directly affect property prices, they do affect the borrowing power of those looking to buy a home, meaning they have access to fewer properties, and may not be able to apply for homes they could otherwise afford.

A Divided Property Market

The property market has consistently grown throughout 2024, however, the later part of the year saw the growth slow steadily, with some regions growing in value, while others experienced a decline.

As predicted, Melbourne home prices dropped throughout 2024, and Sydney’s market may become more accessible in 2025 for home buyers and property investors, as SQM research predicts a drop in the Sydney Housing market between -5% and -1%, while mid-sized cities like Brisbane and Perth will continue to soar[1] (2024).

Sydney will likely retain its top spot as the most expensive market, but Brisbane and Perth will surely rise close to the top, as Melbourne and Canberra continue to become more affordable.

A Cash Rate Drought

The Reserve Bank of Australia raised the cash rate to 4.35% a year ago, and it’s been nearly three years since it was raised from a historic low of 0.10% in May 2022. However, with inflation falling into the RBA’s bandwidth for a cash rate cut. The RBA last cut the cash rate in November 2020, when it dropped from 0.25% to 0.10%, so an approaching cash rate cut would be a big deal, and a relief to homeowners struggling to meet repayments.

Experts Predict a Cash Rate Cut

Most major banks predict that the first cash rate cut will likely be as early as May 2025[2][3] (2024).

Interest rate trends typically follow the cash rate, and with projections of the cash rate going as low as 3.2% by the end of 2025, homeowners and home buyers will hopefully see some much-needed interest rate relief.

Could We See the Emergence of a Buyers’ Market

Signs of a buyers’ market include lower property prices and lower interest rates, giving borrowers more power.

With home values in larger cities declining and the capacity for lower interest rates and more manageable inflation, the market could be on the verge of turning to favour home buyers. Similarly, as interest rates will hopefully begin to descend, homeowners may want to refinance to more competitive interest rates, especially if they recently entered a fixed interest rate. Once the cash rate drops, the market will heat up, fast, and there’ll be plenty of competition.

[1] SQM Research. Sydney & Melbourne Housing Prices to Languish. 26th November 204, viewed 6th December 2024.

[2] NAB Group Economics. NAB Monetary Policy. NAB. 14th November 2024, viewed 6th December 2024.

[3] Watson, Will. Rate cut possible in early 2025: Boyton. ANZ. 20th November 2024, viewed 6th December 2024.

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