The Australian housing market in 2025 is shaping up to be a year of cautious optimism. Investors and first-home buyers alike are watching a mix of positive trends and ongoing challenges. Below we dive into 10 hot topics driving the market this year – from price predictions and rebound regions, to interest rates, demographics, and new quirks like longer selling times. (Spoiler: there’s good news for unit owners and Townsville lovers, but some lingering headaches for affordability.)
Let’s explore each key trend in detail.
1. Price Growth Predictions – What’s in Store for 2025?
Property pundits are largely forecasting continued price growth in 2025, albeit at a moderate pace – no wild boom, but no bust either. Here’s the consensus from major forecasters on houses vs units:
Domain (Listing Portal):
Expects national house prices to rise 4–6% in 2025, and unit/apartment prices 3–5%. They predict a “year of two halves” – a slower first half and a stronger second half once interest rate cuts kick in. In an upbeat scenario, Sydney’s median house could reach $1.75m by year-end (over 60% higher than Melbourne’s!).
KPMG (Consultancy):
Forecasts gentler growth: about +3.3% for houses and +4.6% for units nationally in 2025. This follows a ~5% rise last year. KPMG actually sees units outpacing houses because units offer a more realistic entry point amid an ongoing affordability crisis. They anticipate stronger gains in 2026 once rates fall further.
Property Professionals Survey:
Nearly 65% of real estate professionals expect house prices to rise in 2025, with about 25% predicting >5% increases. Only a tiny 2% foresee significant price falls. This industry survey (CoreLogic’s “Decoding 2025” report) suggests improving affordability, rising incomes and potential rate cuts are bolstering confidence.
Propertyology (Buyers’ Agency Research):
Quite bullish on select markets – they project property booms in 11 of Australia’s 25 largest cities this year. One standout call: Townsville could surge 25–30% in 2025 (more on that later). They do, however, warn Sydney might “commence a 15% slip” from its peak, and forecast a few markets (mostly big cities like Sydney/Melbourne) to see mild declines “unless the RBA intervenes” with rate relief.
Overall, the direction is upward – but at a calmer pace. Houses and units may trade places as growth leaders depending on location. Houses in affordable markets and resource-rich areas are tipped to do well, while units could shine in expensive capitals where buyers are priced out of houses. As one analyst quipped, “2025 won’t be a boom, but it’s not flat as a tack either.” Investors can expect modest capital growth, and first-home buyers might finally see prices rising a bit slower than before (a small mercy!).
2. Market Recovery – Rebound in Early 2025 for Key Cities
After a soft patch, the property market came roaring back to life at the start of 2025 – a recovery so swift it surprised many. In fact, January data showed a “remarkable” turnaround in prices after just a one-month dip. The charge was led by big rebound in Sydney, Brisbane, and Perth:
Sydney: House values jumped +1.1% in January 2025 alone
clawing back recent losses. This put Sydney dwelling values up ~3% year-on-year by January. The harbour city seems to have shaken off its slump like a kangaroo on a trampoline.
Brisbane: Not far behind Sydney, Brisbane house prices rose +0.8% in January .
Over the past year Brisbane’s housing market notched a hefty +9.5% annual gain – signaling strong momentum. Units in Brisbane also jumped about +0.8% in the month, reflecting broad-based growth.
Perth: Continues to boom – houses up +1.1% in January
and astonishing +16.7% year-on-year growth – the fastest in the nation. Perth’s resource-fueled economy and tight supply have made it the standout capital market. Even units in Perth are joining the party (+1.1% in Jan).
This early-2025 rebound means Australia’s late-2024 downturn was blink-and-you-miss-it. According to Ray White Group data, national house prices rose +0.7% in Jan (after a small dip prior), making it “one of the shortest property downturns on record”. Strong fundamentals – persistent housing shortages and high construction costs limiting new supply – helped put a floor under prices and spur the quick recovery.
For investors, the message is that market sentiment has swung positive. Buyer confidence rebounded alongside prices, especially in those leading cities. First-home buyers in Sydney, Brisbane, and Perth might be feeling FOMO again as prices head north. It’s akin to an Aussie summer storm – brief and suddenly the sun’s back out. As one might say, you can’t keep a good market down!
3. Interest Rate Cuts – RBA Easing and Its Impact
After 2022-23’s rate hike rollercoaster, relief is finally on the horizon from the Reserve Bank of Australia (RBA). Many are betting that 2025 will bring the first interest rate cuts in years – and indeed the RBA delivered a surprise 0.25% cut in February 2025, trimming the cash rate from 4.35% to 4.10%. This was the first cut since 2020 and a welcome U-turn for borrowers.
Why do rate cuts matter?
Lower interest rates boost borrowing capacity and confidence. Even a small cut can increase how much buyers can borrow (by reducing loan servicing costs). Domain’s Chief Economist notes that just “one or two rate cuts might be enough to revive demand,” potentially creating a stronger second half of 2025. Already, even a slight decrease in mortgage rates is expected to reignite buyer confidence and a bit of FOMO (fear of missing out) among buyers. Lower rates mean lower monthly repayments, which puts more Aussies back in the game.
From a practical standpoint, analysts estimate that a 0.5% rate drop can lift a buyer’s budget by ~5% (thanks to easier serviceability). Indeed, combined with tax cuts (more on that soon), rate relief is “unlocking greater borrowing power” for many Australians. It’s like giving shoppers a little extra spending money – and we all know what happens when cashed-up buyers hit a housing auction.
Of course, the RBA is proceeding cautiously. They’ve signaled that while inflation is finally easing, they’re “not declaring victory” yet and further cuts will depend on data. Markets anticipate perhaps one or two more quarter-point cuts later in 2025 (many betting on May or mid-year for the next move). For now, monetary policy remains “restrictive” even after February’s trim – meaning mortgage rates are still relatively high. But the direction has flipped downward.
Bottom line:
Falling interest rates improve buyer sentiment and affordability. Investors could see renewed competition for properties as finance becomes a bit cheaper. First-home buyers, in particular, will welcome the increased borrowing capacity that makes those loan calculators slightly less scary. As we Aussies might put it, the RBA finally gave us a spell – and the property market is breathing a sigh of relief.
4. Affordability Challenges – Houses, Units, and the Great Australian Dream
Despite recent improvements, housing affordability remains a major hurdle – especially in capital cities. Median property prices are still very high relative to incomes, and the past decade’s growth outpaced wage gains. This is forcing buyers to adjust their expectations and often favor units or townhouses over detached houses.
Capital city affordability woes:
In Sydney and Melbourne, the median house costs well over 8-10 times the median income, making it tough for first-home buyers to save a deposit and service a loan. It’s no wonder the typical first-home buyer is older, saving longer, and leaning more on the “Bank of Mum and Dad” for help. Surveys confirm many young buyers simply can’t break in without parental assistance these days. (Cue the collective groan of Millennials and Gen Z – cheers, Boomers!)
Units to the rescue:
One clear trend is a shift in demand towards units and apartments, which are generally cheaper than houses. KPMG explicitly notes that units represent a “more realistic route into the housing market” given the affordability crunch. Their forecast has unit values rising a bit faster than houses in 2025 for this reason. We’re already seeing this: unit prices held up better in recent years and are now accelerating as buyers priced out of houses turn to apartments.
Domain expects a “surge in townhouses and smaller apartment complexes” in 2025, particularly in middle-ring suburbs of Sydney, Melbourne and Brisbane. Multi-generational living (kids, parents, grandparents under one roof) and co-living arrangements are also on the rise – unconventional solutions to the high cost of housing. Essentially, the great Australian dream is downsizing – from a quarter-acre block to a nice two-bed unit with a balcony.
Affordability by the numbers:
There have been slight improvements recently. Lower price growth in 2022-2023 and wage rises have seen the proportion of income needed for loan repayments dip from 47.7% to 46.7% (nationally) between late 2023 and early 2024. But in most states it’s still worse than a few years ago. NSW remains the least affordable (no surprise, Sydneysiders spend nearly half their income on mortgages), whereas some states like QLD and SA saw no improvement – meaning affordability is still at its worst levels in decades for many buyers.
With interest rates only just coming off highs and inflation having eaten into household budgets, many buyers will continue seeking affordability hacks. This could include buying units over houses, purchasing in outer suburbs or regional areas, or using government schemes/grants to get a foot in the door. It’s a challenging environment – as one observer joked, some first-home buyers feel they need to sell a kidney to afford a house in Sydney. 
While that’s an exaggeration, it captures the frustration.
On the bright side, a combination of factors in 2025 – slight wage growth, Stage 3 tax cuts (more take-home pay), and stable-to-falling interest rates – should slowly improve affordability metrics. And if more buyers pivot to units, demand pressures on house prices might ease a tad. Still, for many young Australians, the motto is “smaller, further, later” – smaller homes, further out, bought later in life. The dream of a big backyard isn’t dead, but it’s certainly postponed.
5. Supply and Demand Dynamics – Shortage Persists Amid Construction Woes
One of the biggest drivers keeping prices up is the imbalanced supply and demand in housing. Australia simply isn’t building homes fast enough to keep up with population growth and household formation. The result: a chronic housing shortage that’s propping up prices and rents.
Construction slowdown:
In recent years, builders have faced soaring costs for materials and labor, plus a string of construction firm collapses. This has sharply curtailed new housing supply. Even though building approvals have been recovering – about 171,000 homes were approved in 2024 (up 4.7% on 2023) – many of those approved projects aren’t translating into completions on schedule. The pipeline is gummed up by delays and feasibility issues. Apartments are a particular pain point: approvals for units actually fell ~1.3% in 2024, and high-rise projects can take 3+ years to materialize (if they don’t get shelved in the meantime due to cost blowouts).
In fact, the conversion from approval to actual dwelling has been weak. Industry experts note that rising construction costs and labor shortages mean many approved dwellings “remain on paper”. The time lag from approval to keys-in-hand is dragging out. Put simply: we need to build more, but builders are struggling to deliver.
Ongoing housing shortage:
Meanwhile, demand has rebounded fiercely thanks to record population growth (more on that later). The National Housing Accord’s target is 1.2 million new homes over 5 years (starting mid-2024) – roughly 240k per year needed. Currently we’re falling short: in the first 6 months of that period only ~92,000 dwellings were approved, when ~120,000 needed to be on track. At this rate, we could see a shortfall of hundreds of thousands of homes by decade’s end.
The shortage is visible in ultra-low rental vacancy rates and intense competition for properties. Domain’s report highlighted “chronic undersupply” as a key factor sustaining the market in 2024 – too few homes for all the buyers (and renters) out there. Ray White similarly pointed out that limited supply is a fundamental driver of the long-term price trend. When demand outstrips supply, prices tend to get bid up – economics 101.
Cost pressures:
There is a bit of relief in sight: construction cost inflation has moderated from the peaks. Annual building cost growth slowed to ~3–4% in late 2024, down from the frenetic 10%+ spikes seen during the pandemic material shortages. But costs are still rising, just more slowly. Labor remains a constraint (skilled tradies are worth their weight in gold these days). This means builders remain cautious about starting new projects. Many are “hesitant to take on new builds” until costs stabilize fully. The upshot is that new housing supply will likely trickle rather than flood in 2025.
For property investors, this supply crunch is bittersweet: it props up asset values and rents (good for owners), but it also limits acquisition opportunities and keeps prices high for entry. For first-home buyers, the shortage is straight bad news – fewer houses on the market and stiff competition for each listing. Governments are responding with various measures to boost construction (see Section 9), but those will take time to bear fruit.
In the meantime, demand isn’t letting up. With the population growing and borrowing conditions easing, buyer demand in 2025 remains robust. This classic supply-demand mismatch is the fundamental underpinning of the market. Think of the housing market like a game of musical chairs: lots of people circling, not enough chairs (houses) when the music stops. Until we add more chairs, don’t expect prices to drop substantially.
6. Regional Market Performance – The Rise of the Regions (Townsville Shines)
Australia’s regions have been real estate rockstars in recent years, and 2025 continues that story. Outside the big metro areas, many regional markets are outperforming, offering both affordability and lifestyle drawcards. The poster child for 2025’s regional boom is Townsville – which some experts believe will “win” the property market this year.
Townsville – Top of the Charts:
Townsville (North Queensland’s largest city) is forecast to be the nation’s best-performing market in 2025. Propertyology’s outlook pegs Townsville for a whopping +25% to +30% capital growth this year. That’s an eye-popping number, but they’re bullish due to Townsville’s “most impressive pipeline of economic development and lifestyle enhancements” in the country. With a diversified economy (defence, tourism, mining, education) and median house prices that are still relatively cheap (~$400k-$500k), Townsville has room to run. If that forecast holds, Townsville will be “streaks ahead of every other city” in Australia – truly going to town! 
Regions on the rise:
It’s not just Townsville. Propertyology forecasts 20 out of 25 major cities (pop >100k) to see positive growth in 2025, with 11 of them potentially notching double-digit growth. Many of those are regionals or smaller capitals. For instance:
Queensland and WA regional cities are high on the list.
We’ve seen places like Rockhampton, Toowoomba, Cairns, and Bunbury all perform well recently, and that’s expected to continue with those states’ strong economies. In fact, “all of Western Australia, Queensland and South Australia” are predicted to have very strong markets in 2025 (including their regionals), thanks to affordable entry prices and local economic growth.
Tasmania and NT
are expected to gradually improve from prior slowdowns. Regional Tassie cities (e.g., Launceston, Devonport) have had solid growth and should maintain it as mainland affordability pushes some buyers to consider a Tasmanian tree-change. The NT’s best bet is probably Darwin’s recovery and possibly regional hubs if mining picks up.
NSW regions are a mixed bag, but many have held value well. Coastal lifestyle markets (think Coffs Harbour, Port Macquarie) and satellite cities like Newcastle or Wollongong remain popular, though their growth may moderate after huge surges in 2020-21. Still, regional NSW overall is expected to see gains in 2025, even as Sydney softens.
One specific trend: affordability-driven migration. The exodus of people from expensive capitals to more affordable regional towns (which accelerated in the COVID era) is still having an effect. Queensland, in particular, has attracted many interstate migrants, supporting prices in places like the Sunshine Coast, Gold Coast, and inland regional centers. CoreLogic’s survey noted Queensland professionals are the most optimistic, citing the state’s ability to “attract internal migrants” as a key driver.
It’s worth mentioning Brisbane and Adelaide here too – though capitals, they often behave like big regionals and have been standout performers. In 2024, Perth, Adelaide and Brisbane “emerged as standout performers” in price growth, and they are set for more solid gains on top of spectacular last two-year runs. For example, Domain forecasts Perth to see 8–10% growth for both houses and units in 2025, and Adelaide around 7–9%. These markets have the winning combo of affordability, population inflows and strong local economies – similar advantages that many regional cities share.
For investors, regional properties offer attractive prospects: lower buy-in prices, often better rental yields, and now decent capital growth potential. Townsville’s predicted boom is an extreme case, but plenty of regionals could deliver high-single to double-digit growth if these forecasts pan out. First-home buyers are also eyeing regionals as a way to escape city price pain – either by relocating or “rentvesting” (buying an investment in a cheaper city while renting in your preferred city).
To sum up, 2025 is not just a capital city story. In fact, two of the traditionally largest markets – Sydney and Melbourne – might lag behind (Propertyology even dubbed Victoria the “problem child” likely to remain in the doldrums ). Meanwhile, the regions are having their day in the sun. As one commentator slyly put it, “the biggest growth this year may come from outside the big smoke.” Investors would be wise not to ignore the Townsvilles and Toowoombas – there’s gold in them there hills (sometimes literally, if it’s a mining town!).
7. Broader Economic Factors – Stage 3 Tax Cuts, Jobs, and Incomes
The property market never exists in a vacuum – it’s influenced by the broader economy. In 2025, a few macro factors are particularly noteworthy: the huge Stage 3 income tax cuts, the low unemployment environment, and a nascent recovery in real income growth. Together, these are giving households a bit more spending power and confidence, which in turn supports housing demand.
Stage 3 tax cuts (2024/25):
On 1 July 2024, the federal government’s long-awaited Stage 3 tax cuts kicked in, significantly reducing income tax for middle- to high-income earners. The 32.5% tax bracket was abolished and replaced with a flat 30% rate for incomes $45k up to $200k. This means millions of Australians saw an instant boost in their take-home pay. For example, a person on $70,000 gets about $1,429 extra back per year thanks to the tax cut. Someone on $120,000 gains even more – their maximum borrowing power jumps from ~$615k to ~$642k, roughly a 4.4% increase in how much they can borrow for a home loan. High earners ($140k+) see around a 5% boost in borrowing capacity.
In effect, Stage 3 cuts function as a big fiscal stimulus for the housing market. Freed-up cash can go towards bigger mortgages or saving a deposit. Many households are using the extra funds to pay down debt or stash in offset accounts (smart moves), but it also improves serviceability for new loans. By one estimate, the cuts raise the potential purchase price (with 20% deposit) from ~$769k to ~$803k for that $120k earner. That’s not trivial – it can be the difference that gets you the house instead of the apartment, or a home in your preferred suburb versus a compromise.
Employment and wages:
Australia is enjoying a remarkably robust labor market. Unemployment is hovering around historic lows (~3.5–4%). In 2024 it even dipped to levels not seen since the 1970s. Such low joblessness means most people who want a job can get one, and job security is high. This has helped households “cope well with the rate rises” of the past couple years – even as mortgage costs went up, the fact that people kept their jobs and income was a savior. The fear of unemployment (which often triggers forced sales or defaults) has been minimal, so we didn’t see distress selling at scale.
Wages have also been rising, finally outpacing inflation in late 2024. The official Wage Price Index was up about +3.2% annually to Dec 2024. While inflation was higher, by 2025 inflation is coming down into the 3-4% range, meaning real wages are starting to grow slightly. Treasury forecasts real disposable incomes to rise ~0.5% in 2024–25 – not huge, but after years of going backwards, it’s a relief. Higher wages and the tax cuts together put households in a better position to save and spend.
Consumer confidence:
With election season on the way (a federal election is due by May 2025), the government certainly hopes these positive economic trends buoy consumer mood. There’s also the Stage 3 tax cuts’ psychological effect: people see more money in their pay and might feel more confident about making that big purchase. CoreLogic’s research head noted that “improving household savings and easing interest rates” are expected to drive property demand later in 2025. Indeed, higher real incomes and lower interest outgoings mean housing affordability metrics should improve (albeit slowly). Melbourne, for example, is cited as a market where improved affordability could spur a recovery in buyer demand.
On the flip side, there are risks: if unemployment ticks up from its lows (say if the economy slows more than expected), that could dampen housing. As of now, unemployment is forecast to remain relatively low (~4–4.5%) through 2025 – still quite healthy historically. Additionally, Stage 3 tax cuts skew benefits to higher earners, which might widen inequalities (someone on $200k gets a much bigger tax saving than someone on $50k). But for the housing market, it’s largely stimulatory, since higher-income households are often the ones buying investment properties or upgrading homes.
In summary, macro conditions in 2025 are cautiously favorable for housing. Think of it as tailwinds finally, instead of headwinds: fiscal policy (tax cuts) is pumping money in, monetary policy (rates) is loosening, the job market is solid, and real incomes are inching up. After a few tough years of cost-of-living pain, Australians might feel a bit more financially limber. For investors, a strong economy means tenants can pay rent and maybe even pay a bit more. For first-home buyers, every extra dollar in the pay packet and every 0.1% off the mortgage rate helps in the battle against that deposit and repayment mountain.
8. Demographic Shifts – Baby Boomers and Population Growth
Demographics are destiny in real estate, and two big demographic forces are at play: the decisions of the Baby Boomer generation, and Australia’s rapid population growth (driven by immigration).
Boomers making moves (or not):
Baby Boomers (those born roughly 1946-1964) hold a huge portion of Australia’s housing wealth – around half of all private wealth by some estimates. As the youngest Boomers hit their 60s, this entire generation is now at or nearing retirement age, prompting questions about downsizing, upsizing, or transferring wealth.
Many Boomers are reluctant to downsize. Studies show they often stay put in the big family home due to emotional attachment and a lack of appealing downsizing options. Australia has 13 million spare bedrooms in under-occupied homes, largely owned by older Australians. The expected “wave” of downsizing sales has been more of a trickle. Why? Downsizing can have financial downsides (e.g. impacts on pensions, stamp duty costs, etc.) and suitable smaller homes in the same community are scarce. So a lot of Boomers are “aging in place,” effectively locking up stock of larger houses that might otherwise recycle to younger families.
• On the other hand, some Boomers are cashing in. By 2025, all Boomers will have reached the age to access their superannuation nest eggs. This financial flexibility may prompt many to consider downsizing or investing in property (some might use super to buy a retirement villa or a rental property). Additionally, an immense generational wealth transfer is underway: Boomers assisting their kids and grandkids with home purchases. The so-called “Bank of Mum and Dad” is now one of Australia’s biggest lenders! This helps younger buyers get into the market (boosting demand), but also means Boomer wealth continues to influence housing long after they retire.
• We’re also seeing Boomers make lifestyle moves: selling up in the city and moving to coastal or country locales (tree-change/sea-change) for retirement. This has driven up prices in many regional retirement havens. Conversely, some are up-sizing by buying holiday homes or second properties.
The net effect of Boomer behavior is complex, but one thing is clear: they are a key supply factor. If Boomers en masse decided to sell their large homes, we’d see a surge of family houses on the market (easing supply pressure). But so far, they’ve been doing it gradually. In fact, the shortage of listings in many suburbs is partly because older owners aren’t selling. It’s often quipped that “Boomers won’t move until carried out in a box.” Dark humor aside, policies to incentivize downsizing (e.g. allowing contributions of home sale proceeds into super, stamp duty concessions) have been introduced to nudge this along.
Population growth – the big influx:
Australia’s population is growing at breakneck speed again. After the pandemic lull, overseas migration has surged to record or near-record levels:
• In the year to March 2024, the national population grew 2.3% to 27.1 million – an increase of about 615,000 people in one year. A whopping 83% of that growth was from net overseas migration. We added more than half a million new residents (net) in a year – equivalent to adding a city the size of Gold Coast or Canberra! This pace is one of the fastest in the developed world.
• Net Overseas Migration (NOM) for 2022-2023 was around +400k to +500k. While it may moderate a bit, forecasts still have NOM running high in 2025 (perhaps 300k+). The federal Population Statement projects growth of ~2.1% in 2023-24, easing to 1.7% in 2024-25 – still well above average. Simply put, strong immigration is here to stay, with international students, skilled workers, and humanitarian intake all contributing.
This population boom is rocket fuel for housing demand. All those people need a roof over their heads – primarily renting at first, but many will become buyers in time. It’s a key reason why the rental market has been in crisis (not enough rentals for the influx) and why any dwelling we can build gets absorbed quickly.
Interestingly, there’s also been a trend of increasing household size recently (some adult kids moving back home, or more people per dwelling) . That’s a response to housing stress – people doubling up when rents are too high or supply is tight. If/when conditions ease, those households will split and create additional underlying demand. The Domain/CoreLogic data suggests this could put downward pressure on rental demand if sustained, but in the longer run, each migrant ultimately adds to housing demand one way or another.
For investors, population growth is generally fantastic news – more tenants and future buyers. For first-home buyers, more population can mean more competition, but also economic growth and potentially more diverse housing being built. One challenge: infrastructure and housing supply need to catch up. The strain on cities (traffic, public transport, etc.) becomes an election issue, and there’s talk that immigration levels might be “too high” for our housing to handle in the short term. But as demographers point out, “if Australia didn’t have immigration, we wouldn’t have the economic growth we enjoy”. It’s a balancing act.
In a nutshell, Boomers and immigration are two sides of the housing coin: Boomers influence supply (will they free up homes or keep them tied up?), and booming population drives demand. In 2025 we see Boomers mostly holding on (with some gradual downsizing) and population surging – a combination that generally tightens the market. Policymakers are eyeing these dynamics closely, since they underpin long-term housing affordability and availability.