Competing forces divide opinion about property price direction in 2025

ore properties are coming onto the market to suppress real estate price pressures but expectations of one or more interest rate cuts have price expectations in uncertain territory.

The Commonwealth Bank has weighed in with an each-way bet, tipping property prices to fall in the next few months before picking up again at the back end of 2025.

Listings are up around the country, as the heat in the market gradually reduces to a lukewarm simmer.

SQM Research’s latest data shows that total nationwide residential property listings increased by 4.5 per cent over January 2025, reaching 243,642 listed properties. This marks a strong 10.3 per cent rise compared to January 2024.

The increase in listings was evident across most major cities. Sydney saw a notable monthly rise of 7.3 per cent, with listings reaching 29,791—19.0 per cent higher than the same time last year. Melbourne also experienced an increase of 2.1 per cent month-on-month, bringing total listings to 37,873, reflecting a 15.9 per cent yearly rise.

Brisbane recorded the highest monthly rise at 9.8 per cent, reaching 16,241 listings, with a modest yearly increase of 4.4 per cent. Perth followed with a 7.9 per cent monthly rise and a 5.0 per cent increase year-on-year.

Gareth Aird, Head of Australian Economics, Commonwealth Bank, said prices would recover from modest declines to finish 2025 up 4 per cent nationally.

“Momentum has cooled when looking at the pace of home price growth over the past year,” Mr Aird said.

“In turn, rental growth is also moderating in most parts of the country.

“It is not unusual to see some fatigue creep into the national housing market given affordability remains stretched on most conventional metrics.”

“If buyer appetite responds quickly to an interest rate cut it is possible that fear of missing out once again becomes a key theme in the market.”

What will the RBA do next?

Australia’s financial markets are predicting no more than four rate cuts this year, as a reaction to the RBA deliberately not raising the cash rate especially high by global standards.

The big four banks all predict the RBA will lower the cash rate — currently 4.35 per cent — at its 17-18 February meeting. The bond market predicts the RBA will lower the cash rate to 3.45 per cent by the end of the year.

Sally Tindall, Data Insights Director, Canstar, said banks were lowering fixed rates, although these loans are very much in the minority among borrowers.

“It’s no surprise to see NAB reducing their fixed rates in the lead-up to an expected cash rate cut,” she said.

“What is surprising is that we haven’t seen more lenders do it in the lead-up to the next RBA meeting.

“I do expect more lenders will follow suit and start paring back their fixed rates.”

If an interest rate cut does occur … housing prices are expected to rise between 6 per cent to 10 per cent for the year.

– Louis Christopher, SQM Research

Rate cuts could set up the national property market for price rises well above the 4.3 per cent seen in the past 12 months.

Louis Christopher, Managing Director of SQM Research, said it was hard to know whether the rise in listings has been driven by a rise in vendor confidence or a fear by vendors seeking to exit the market now.

“Afterall, let’s recall, 2024 did end on a rather weak note and the expectations of an imminent cut in interest rates only occurred from last week’s inflation numbers.

“Going forward, the RBA’s meeting and interest rate decision on 18 February will naturally be the focus for most participants.

“If an interest rate cut does occur, we believe this will lift confidence in buyer demand with housing prices expected to rise between 6 per cent to 10 per cent for the year.”

In January, Australian capital city house prices edged lower for a fourth consecutive month. Regionally, prices ticked up in January.

“We don’t expect property prices in Sydney and Melbourne to suddenly shift higher as rates are cut given there is a lot more advertised stock on the market compared to a year ago – advertised stock levels sit well above the five‑year average for this time of the year in Sydney and Melbourne – but it is a risk,” CBA’s Mr Aird said.

While Australian listings were up five per cent year-on-year in the six months to December 31, buyer enquiries have grown four per cent and “inspection interactions” climbing 36 per cent, according to REA Group.

REA Group CEO Owen Wilson on Thursday (6 February) said, “This is one of the healthiest markets I’ve seen in my time at REA.”

He attributed that to the fact there are a lot of buyers and sellers.

“There’s a lot of sellers, that means there’s stock for the buyers to buy, and then they can sell their property.

“I think that’s what you’re seeing here.

“I think there’s not a person in the country that thinks a rate rise is coming – it’s just a matter of time of when we get our rate cut.”