The Australian Property Market: Listening to the Pulse of Our Economy
Australia’s property market does not typically move in one direction only or backwards at one time. The flow of the property market is often dictated by the ever-changing and ongoing force of the Australian economy, with many of these forces occurring over an extended period. As buyers and sellers begin to look ahead to 2025, a common question that continues to be raised by both sides is, “Who will come out on top?”
History shows that the answer is a lot of layers instead of being black and white.
Understanding the Buyer’s and Seller’s Markets
A buyer’s market emerges when housing supply overtakes demand. During this period, properties are listed for longer durations, negotiations favour purchases and price growth retreats. A seller’s market, on the other hand, depends on scarcity. In this case, the listings are limited, demand is steady, and the competition between buyers creates an upward pressure on prices.
If we study the historical patterns, it reveals that the Australian property market has spent significant time in seller-favourable conditions, primarily due to structural undersupply and consistent population growth.
The Economic Environment in Australia as we Enter 2025
The impact of elevated interest rates on the Australian property market was mostly absorbed by late 2024. As inflation began to decrease, the Reserve Bank of Australia stopped making major interest rate increases through aggressive tightening procedures. While mortgage lending capacity is lower than it was in a historically low mortgage lending rate environment, stability has been a significant driver in the marketplace today. Buyer confidence tends to return when there is less uncertainty.
As wage increases have increased, many households were able to adapt to increased (higher) mortgage repayments and have thus less risk of having to sell their properties under duress due to forced sales. Based on this resilience in the housing market, it is unlikely that there will be a widespread reduction in property prices in 2025.
Population Growth: The Demand Engine
The consistent growth in population remains one of the strongest drivers of housing demand in Australia. However, the population remains concentrated in major cities where there is a plethora of employment and education opportunities. Housing competition among new immigrants continues to increase in these areas. In addition to the influx of new immigrants, a high percentage of international students also increases the rental demand in the already tight property markets. This trend causes a growing gap between the number of homes available and the number of homes required. This persistent demand spills into the purchase market as rents go up and the affordability equation shifts.
Unresolved Issues Associated With Supply Constraints
One of the most defining features of the Property Market in Australia is the ongoing shortage of housing. Construction delays, increasing building cost levels, a lack of labour force and planning constraints have played significant roles in slowing down the construction of new dwellings. This trend causes a growing gap between the number of homes available and the number of homes required. The trend of builders going bankrupt is also affecting the timeline for delivering new units, which is leading to additional delays in the availability of those units.
Major Cities in Focus
Each property market in Australia will be very different from another market, depending on its region. Sydney and Melbourne, despite being more mature cities, have remained undersupplied in established areas. On the other hand, Brisbane, Perth and Adelaide are considered momentum markets as each of these markets is benefiting from strong population growth and significant infrastructure investment within their regions. Therefore, these three cities have the strongest position as a seller’s market relative to national averages.
We can conclude that Australia’s 2025 property market is not about extremes. Rather, it is about locality, timing and – where informed decisions, rather than market labels, determine success.
