- 04 Oct 2024
- By API Magazine
For almost two years, national property prices have recorded month-on-month gains but 2025 could present a different story.
Despite property investor demand approaching record levels a leading economist is forecasting property price growth to stagnate in 2025.
Property investors continue to pour into the market, with the Australian Bureau of Statistics (ABS) lending indicator data released Friday (4 October) showing that the value of new investor loans rose 1.4 per cent to $11.7 billion, 34.2 per cent higher than August 2023 and close to the previous peak in January 2022.
The total value of new housing loans also rose, up 1.0 per cent in August to $30.4 billion.
The pace of growth among owner-occupiers was roughly half that of the investor market segment, with those loans rising 0.7 per cent to $18.7 billion, 16.8 per cent higher than August 2023.
The increase in value of new loans is not entirely down to rising property prices, given national property in September only rose by 0.4 per cent, a decline on the 0.5 per cent of the previous month, according to CoreLogic.
Maree Kilroy, Senior Economist for Oxford Economics Australia, said the property market would continue weaken in the year ahead.
Four capital cities recorded a fall in dwelling values through the September quarter, led by Melbourne where values were down 1.1 per cent. Canberra, Hobart and Darwin also recorded declines over the quarter.
“The deceleration in price growth is broadening,” Mr Kilroy said.
“Advertised stock is running ahead of demand in several markets and affordability pressures are pushing buyers towards lower prices properties, which is evident in the lower quartile price bracket holding up, quarterly unit price growth finally outpacing houses and the faster pace of growth seen by the mid-tier cities.”
Following a 7.5 per cent lift in the median combined capital city house price in the 2024 financial year, Ms Kilroy said they now expected notably softer growth over FY2025, with interest rates likely on hold until June quarter 2025.
Ms Kilroy told API Magazine that a decline in capital growth rates in one city would offset any national impact from other cities’ continued growth.
“Our expectation for softening growth into 2025 is due to slowing momentum already observable in monthly price growth continuing, primarily in Sydney.
“Even with currently stronger price growth in Perth, Brisbane and Adelaide relative to the national figures, we think peak quarterly growth for these cities is behind us.”
Ms Kilroy’s observation about the lower quartile market holding up is playing out across the country.
Across the combined capitals, lower quartile dwelling values have increased by 12.4 per cent over the past twelve months compared with a 3.8 per cent rise in values across the upper quartile.
In Sydney, the fastest growing region is Western Sydney suburb Fairfield, up 13.0 per cent over the year to a median price of $1,121,396. Even Melbourne’s declining property market had the outer northwest Tullamarine–Broadmeadows region top that state’s growth list (1.9 per cent, $671,185).
All the areas that recorded growth rates above 20 per cent were in the mid-sized capitals’ affordable outer suburbs.
Perth had five such (SA3) regions, namely Swan (30.5 per cent), Kwinana (30.1 per cent), Gosnells (29.1 per cent), Serpentine–Jarrahdale (28.6 per cent) and Armadale (28.4 per cent). Playford and Salisbury in Adelaide’s north notched up annual capital growth of 21.6 and 20.0 per cent respectively, while Brisbane’s Springwood–Kingston area clocked up 23.7 per cent.
Regionally, where capital growth has lagged the capitals, only WA’s Mid West region (27.4 per cent) and north Queensland’s Townsville (25.8 per cent) cracked the 20 per cent barrier.
Six of the eight capitals have seen unit values rise by more than house values, or in the case of Melbourne, record a smaller decline, over the September quarter.
Property price growth slowing
National property values have entered their 21st consecutive month of growth, but the rate of increase is losing momentum due to persistent affordability pressures, high interest rates, and subdued consumer sentiment.
Strong housing demand, driven by population growth and tight rental markets, has continued to support price increases, even amid broader economic challenges. However, as more homes are listed for sale, the balance between supply and demand has begun to shift, offering buyers more choice and slowing price growth.
Eleanor Creagh, Senior Economist, PropTrack, said housing demand remains resilient.
“The number of homes listed for sale has lifted, providing more choice and slowing price growth, however, the pace of growth remains varied with differing supply and demand conditions driving diverse performance across the country.
“Though prices are rising, sustained high interest rates, cost of living pressures, weak consumer sentiment and affordability constraints are weighing.
“Buyers now have more properties to choose from, though uncertainty around the timing of interest rate cuts is likely also having an impact on the pace of growth. Ahead, prices are expected to lift through the typically busier spring selling season, albeit at a slower pace.”
Predictions about when interest rates will be cut vary but most are expecting it to happen by mid-2025 at the latest.
Bendigo Bank’s Chief Economist, David Robertson, on Friday said rate relief is finally becoming more imminent.
“Thankfully, the latest RBA policy meeting no longer considered a rate hike as an option – aligned to our view since January that the RBA would be on hold for all of 2024.”
“As a result, we predict the first rate cut here in Australia to occur by May 2025, with a strengthening case for February next year.”
“Variables remain, however, when it comes to how quickly Australian’s will see that illusive first rate cut, the first being the pace of inflation moderating; the second, what the impact of tax cuts and cost of living measures are on household demand; and thirdly – labour markets.”
Additional reporting by Sasha Bennett
Article Q&A
Where are Australian property prices heading in 2025?
Following a 7.5 per cent lift in the median combined capital city house price in the 2024 financial year, a leading economist said they now expected notably softer growth into 2025, with interest rates likely on hold until June quarter 2025.
Where are property prices falling in Australia?
Four capital cities recorded a fall in dwelling values through the September quarter, led by Melbourne where values were down 1.1 per cent. Canberra, Hobart and Darwin also recorded declines over the quarter.
Where are property prices rising fastest in Australia?
All the areas that recorded growth rates above 20 per cent were in the mid-sized capitals’ affordable outer suburbs, with Perth suburbs dominating the list.
