House Prices in 2025 – What’s in store for the New Year?
After 22 consecutive months of growth, national home values ended 2024 down -0.1% in December according to Corelogic research.
This December downturn also dragged the quarterly change into negative territory to mark the end of a strong period of growth for Australian house prices characterised by high interest rates, cost of living pressures and reduced borrowing capacity.
But what’s in store for 2025? We’ve been keeping an eye on what the experts are saying and have unpacked some of the key predictions for the year to come.
Is Price Growth Slowing Down?
Home values in the first half of 2024 rose 4.1% before slowing to just 0.7% through the back end of the year with that December decline marking the end of a strong growth period.
CoreLogic’s research director, Tim Lawless, said the decline in values is no surprise.
“Growth in housing values has been consistently weakening through the second half of the year, as affordability constraints weighed on buyer demand and advertised supply levels trended higher.”
So, are we about to see house prices continue to decline?
SQM Research’s latest Boom and Bust Report suggests that house prices in two major capital cities will continue to decline further in 2025 but have forecast the national average to rise by 1% to 4%.
Houses in Sydney and Melbourne are both tipped to experience a drop of as much as 5% in 2025. Perth is forecast lead the market with up to 19% growth forecast, followed by Brisbane (+14%) and Adelaide (+13%).
Pressure has been mounting on homeowners in recent times, the Australian property market is experiencing shifts that are causing concern for many. QPF Finance’s Senior Residential Property Specialist, Stephen Boyce, offers a balanced perspective on what’s ahead.
“There’ll be areas of the country that will experience a decline in housing prices this year,” Stephen explains. “But there’ll be others that will likely prosper. At a national level, everything the experts are saying points toward a slowing of growth, not necessarily a decline in house prices across the market.”
One of the most significant challenges facing borrowers in recent years has been the reduction in borrowing capacity. Rising interest rates and the increasing cost of living have made it harder for many to secure the loans they need to buy or upgrade their homes.”
Stephen notes that while this trend may seem worrying, there’s reason to remain optimistic.
“It’s unlikely we’ll see a very long or significant downturn because there’s still strong demand for housing. If interest rates are cut, this could increase borrowing capacities, and we may even see property prices rising again.”
When can we expect rate cuts?
It’s the burning question for every property owner in the country but when can we expect the RBA to pull the trigger on a rate cut.
Research director and author of SQM’s 2025 Housing Boom and Bust Report, Louis Christopher predicts that we’ll see a rate cut of 25-50 basis points around mid next year.
Economists at our four major banks are divided on the subject though with Westpac & NAB predicting rate cuts in May whilst Commonwealth Bank & ANZ have forecast February for the first rate cut.
The Supply & Demand Imbalance
Australia’s housing market is starting to cool off coming into 2025 according to Ray White Chief Economist, Nerida Consibee and the stress on current homeowners is increasing the supply of homes for sale.
“More homeowners are feeling the strain of high mortgage payments, and we’re seeing an increase in property listings as some decide to sell. This higher supply of homes for sale could put downward pressure on prices in some areas.”
Looking forward to 2025, experts at CoreLogic believe that lower volumes of new builds will be a continuing trend this year with high construction costs and intense competition for labour playing a key role. With fewer houses being built, more buyers will be turning to existing homes helping to support housing values.
Andrew Sterling, QPF Finance’s General Manager of Commercial and Property Finance, shares a similar view on how the imbalance between supply and demand is shaping property values.
“Fewer new builds on the market are continuing to push more buyers toward existing homes, which helps support property values. We expect to see moderate growth in property prices until the balance between supply and demand evens out,” Sterling explains.
Influence from the Federal Election?
At this stage, a federal election is scheduled for the 17th of May 2025 but there’s speculation that an early election will be called. One of the major talking points will likely be the housing crisis so could this impact the property market?
The Coalition is already proposing a plan to allow first-home buyers and separated women to access their superannuation for a home deposit so it’s worth watching to see what other election promises could influence the market.
We likely won’t see an immediate impact from the federal election but if election campaigns are focused on housing and migration policies we could start to see influence on housing conditions and the market in 2026 and beyond.
What does all this mean for you?
If you’re already a property owner – you could be sitting on untapped equity that you could be using to your advantage. Maybe you want to leverage that equity to buy an investment property in 2025 or further increase your property value by renovating.
For those that don’t own property, if we see the cash rate decrease as predicted, your barriers to entry may reduce and the second half of 2025 might be a good time to engage with an expert mortgage broker and get yourself in the market.
“Although it would be very handy to have, there’s no crystal-ball that will tell us what’s going to happen in the housing market over the next year,” Andrew explains, “However, all current indicators suggest a reduction in interest rates and generally moderate growth in values.”
“Whether you’re buying, selling, or holding, we recommend staying informed and getting advice from a trusted industry expert to help you navigate the market.”
Looking to buy in 2025? Get in touch with a QPF Finance Mortgage Broker today for a Free Home Loan Health Check!
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