With interest rates dropping, borrowing power increasing, and demand outpacing supply, Australia’s property market is set for growth in 2025. But how much will prices rise, and what’s driving this trend? This blog unpacks the key factors behind rising home values, providing crucial insights for homeowners, investors, and first-home buyers.
The Key Drivers of Property Price Growth in 2025
Interest Rate Cuts Are Boosting Borrowing Power
The Reserve Bank of Australia (RBA) recently cut the cash rate to 4.1%, making mortgages more affordable and allowing buyers to borrow more money. With another rate cut expected later this year, borrowing capacity could increase by up to 10%, pushing property demand higher. Historically, when interest rates drop, property prices rise—a trend seen in previous cycles.
A Growing Population Means a Housing Shortage
Australia’s population is experiencing rapid growth, particularly with record-high migration and an influx of international students. The country is already facing a housing shortage, with estimates suggesting a shortfall of between 200,000 and 300,000 homes. With more buyers competing for fewer properties, prices are expected to continue climbing further.
Improved Housing Affordability is Encouraging More Buyers
Wage growth, combined with falling interest rates, is making housing more affordable than it was last year. Buyers who were previously priced out of the market in 2023-24 are now returning, increasing demand. First-home buyers, in particular, are expected to take advantage of better conditions and government incentives such as the First Home Owner Grant (FHOG) and stamp duty exemptions.
Rents Are Soaring, Pushing More People to Buy
The rental market has experienced record-high increases, leading many renters to consider buying rather than continuing to pay inflated rent prices. Investors are capitalising on high rental yields, meaning competition for entry-level homes is increasing. This shift is accelerating demand for housing, particularly in affordable and high-growth suburbs, as more Australians look for long-term financial security through homeownership.
What Does This Mean for Homebuyers & Investors?
For homeowners, this growth suggests that property values will continue to rise, leading to greater equity and capital appreciation. Investors stand to benefit from high rental yields and continued capital growth, making 2025 a prime year to expand their portfolios. For first-home buyers, now may be the best time to enter the market before prices rise further, particularly with improved affordability and government incentives designed to assist them.
A breakdown of price predictions in major Australian cities.
How Much Will Prices Rise in 2025?
According to property market analysts, AMP’s Shane Oliver predicts a 3% national home price increase for 2025. CoreLogic data suggests that key markets such as Sydney, Melbourne, and Brisbane may see even stronger growth than expected. However, given the strength of market fundamentals, property prices could exceed these forecasts as supply struggles to keep up with demand.
Final Thoughts: The Market Is Moving – Will You?
The Australian property market in 2025 is primed for growth, and the window to buy before prices rise further is closing fast. If you’re considering investing or purchasing your first home, understanding market trends can provide you with a competitive advantage. Staying informed, making strategic decisions, and acting at the right time will be key to securing the best opportunities in this evolving market.