As we kick off 2025, Australian property investors are looking ahead to what the year might bring. The property market can be tricky to predict, but several key factors could shape its direction. From interest rates to housing supply and rental demand, here’s a breakdown of what you can expect in the year ahead.
1. Interest Rates and Borrowing Costs
One of the biggest concerns for investors is interest rates. In 2024, the Reserve Bank of Australia (RBA) maintained relatively high rates to control inflation, and this trend may continue into 2025. However, if inflation eases and the economy stabilises, the RBA might begin lowering rates later in the year. This could increase borrowing opportunities for investment and add further demand to the market.
Despite the recent housing and cost-of-living crises, Australia continues to experience low unemployment at 4.1% (ABS, October 2024) and average levels of mortgage arrears. This makes a major sell-off of homes due to financial stress unlikely.
2. Rental Market and Vacancy Rates
Rental affordability remains a significant concern as we move into 2025, particularly in cities like Perth, Adelaide, and Sydney. While rent growth has slowed—with a national average increase of 5.3% in 2024—rental prices are still rising at more than twice the pre-pandemic average.
Experts predict the rental market will stabilise, but the supply of rental homes is expected to remain tight. In high-demand areas, renters are unlikely to see any significant cost decreases.
3. Housing Supply and Construction Activity
Australia faces a housing shortage, and the government is working to encourage new construction. However, rising building costs and delays in construction projects mean supply is likely to remain tight for some time.
Investors considering newly-built homes may face delays and higher construction costs in 2025. Nevertheless, conditions have improved significantly since the end of the pandemic. The lack of new housing continues to drive strong demand for both new and established properties.
For those considering already-built homes or apartments, areas with limited new developments might experience higher growth.
4. Government Policy and Taxation Changes
Government policies play a significant role in shaping the property market. In 2025, potential changes to property-related taxes and incentives are worth watching. Key areas of focus could include negative gearing and capital gains tax, as the government seeks to make the tax system fairer and reduce reliance on property for wealth building.
While dramatic changes are unlikely in early 2025, even small adjustments could impact investment returns. Investors should closely monitor any developments.
There is also an ongoing push for affordable housing and measures to help first-time homebuyers. Programs such as the Commonwealth Government’s Help to Buy Program, which passed Parliament in November 2024, are expected to provide some relief—but implementation may take time
5. Shifting Regional Markets and Growth Potential
Regional property markets will continue to evolve in 2025 as more people move away from major cities. However, not all regions are experiencing the same level of growth.
Areas well-connected to major cities via highways or rail and those with strong local economies are likely to see continued demand. Regional centres such as Hervey Bay in Queensland, Mount Barker in South Australia, and the northern and southern beach suburbs of Perth are examples of high-growth areas.
Governments are also incentivising regional growth through infrastructure projects that enhance transport links and public amenities. Investors should target regions with strong growth potential driven by infrastructure development, job creation, or lifestyle appeal, while being cautious of areas where property prices may have peaked.
5. Market Sentiment and Risk Management
Economic shifts, inflation, and global events may increase market uncertainty in 2025, potentially making property prices more volatile.
Our investment committee carefully monitors market trends and manages risk on your behalf. By diversifying portfolios across property types and locations, we protect your investments from significant market swings, offering ongoing reviews and strategic guidance to keep you on track.
Navigating the property market in 2025 requires careful planning and up-to-date insights. Whether you’re an experienced investor or just starting out, our team is here to help you achieve your property goals. Contact us today to discuss your investment strategy and make the most of the opportunities ahead.
The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided.
