Australian housing market trends to watch in 2025

The property market is one of Australia's favourite topics of discussion. More than two thirds of our household wealth is tied up in residential property, after all - about $11 trillion worth.

Whether you're considering the prospects of your real estate portfolio or anxious to get your foot on the property ladder, you probably want an idea of how the market will perform in the coming months.

Here's what you need to know about how things went in 2024 and the trends that could define the market this year.

How did the Australian housing market perform in 2024?

After an unexpectedly strong 2023, the Australian property market continued to perform through the early months of 2024 before stagnating towards the end. December '24 saw the CoreLogic Home Value Index (HVI) drop 0.1% - its first monthly decline since January '23.

CoreLogic Research Director Tim Lawless said the drop off in the second half of the year represented the housing market "catching up with the reality of market dynamics".

"Growth in housing values…consistently weaken[ed] through the second half of the year as affordability constraints weighed on buyer demand and advertised supply levels trended higher.

Overall, prices rose 4.9% throughout the year, but there was obviously a huge amount of variance in markets. Perth (up 19.1% in 2024), Brisbane (up 11.2%) and Adelaide (up 13.1%) were the standout capital city performers. On the other hand, Melbourne (down 3%), Hobart (down -0.6%) and Canberra (down -0.4%) all saw annual declines.

Another notable development occurred in regional markets, which outperforming the capitals, growing 6% through the year compared to the combined capitals' 4.5% increase. The Regional Movers Index suggests more and more Aussies are migrating from the capitals to regional hotspots like the Sunshine Coast and Newcastle as major cities become increasingly unaffordable.

Australian housing market: Trends to watch in 2025

According to the experts, these are some trends to watch out for in the property market this year.

1. Cyclical downswing

After almost two years of consecutive growth, December '24 saw the average Australian home value decline 0.1%. Quarterly growth was flat or negative in Sydney (-1.4% through the quarter), Melbourne (-1.8%), Hobart (-0.6%) and Canberra (-0.3%). Prices are still going up in Brisbane, Perth and Adelaide - the cities acting as the growth drivers of the past couple of years - but the pace of growth is softening in all three.

CoreLogic Head of Research Australia Eliza Owen says this is likely the start of a "cyclical downswing".

"Monthly home value growth has slowed since June 2024," Ms Owen said.

Many analysts pointed to undersupply as a key reason property prices have gone up since the end of 2022, despite high interest rates. Across Australia the number of homes available to buy has been well below long-term averages, creating a sellers' market and pushing up prices. Towards the backend of last year, though, supply started to pick back up and likely played a role in prices coming down.

"Total listings levels across the country finished 2024 5% higher than a year [prior]," Ms Owen said.

For aspiring buyers sniffing opportunity, Ms Owen said that, while it's "likely" prices will continue to fall in the opening months of 2025, any tumble might not be as dramatic as you may be hoping.

"The largest recorded decline in the national HVI was only -7.7%, from October 1982 to March 1983," she explained.

"At the national level, home value declines tend to be shorter and smaller than periods of increase.

"Sellers may be able to withhold their property from sale until values are rising, effectively restricting available supply during periods of property falls."

2. Interest rate changes

The opening months of 2025 will likely be dominated by speculation about if and when the RBA will start bringing the cash rate down. Conventional wisdom dictates that lower interest rates will improve buyers' borrowing power, boosting demand and therefore prices. At the same time, house prices rose throughout 2023 despite several rate hikes, so it's sensible to be cautious in taking these truisms as gospel.

Economists at Westpac and NAB are currently predicting the first rate cut will happen in May, while CommBank and ANZ are calling February. As of January 9, the RBA ASX rate tracker - estimating the likelihood of rate cuts based on trading activity - put the chances of a February cut to 4.10% at 78%.

3. Less international investment

Declining foreign investment was another notable trend of 2024. The Foreign Investment Review Board (FIRB) approved 5,581 purchases of Australian real estate by foreigners, down from 6,576 the previous year, with the value of these transactions falling from $7.9 billion to $6.6 billion despite property prices rising.

Domain chief of research and economics Nicola Powell believes overseas investors are being put off by the cost of buying Australian property.

"We have to remember that foreign buyers do have higher applications costs…. fees, [FIRB] approval, extra taxes and duties they have to pay," she told InfoChoice Group.

The fees on foreign investors buying established properties tripled in April - part of the Government's pledge to "provide more homes for Australians." Dr Powell said it would be unsurprising to see rules become more constrictive in 2025.

"I think what governments are trying to do is disincentivise foreign investment."

This could mean less demand. But it also could hurt housing supply, as foreign investors usually must build or develop property in order to meet FIRB criteria.

Read more: Buying property in Australia as a foreigner

4. Rental market likely to soften

The rental market also closed 2024 softer than it started. The CoreLogic national rental index rose just 0.1% in December, marking 0.4% quarterly growth and a 4.8% rise through the calendar year.

"On a rolling basis we haven't seen an annual change this small since the 12 months ending March 2021," Mr Lawless said.

Rental growth is slowing across most of Australia and Mr Lawless expects this to continue next year.

"Rental trends are likely to remain subdued in 2025 as overseas migration returns to more normal levels and the average household size continues to trend higher towards pre-Covid levels," he said.

Looking to start 2025 out on the right foot? Check in with your home loan

Financial success starts with preparation, and a good place to begin setting yourself up for a financially healthy 2025 is to review your home loan. With rates expected to fall this year, now could be the ideal time to assess whether your current mortgage is still meeting your needs.

If it's not, it might be time to explore more competitive options that better suit your financial goals.

Here are some of the most competitive home loans available right now:

Important Information and Comparison Rate Warning

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