Property Edge
Setting the Stage for 2025 in Property
Welcome to the first edition of Property Edge Weekly for 2025! As we embark on a new year, the Australian property market is poised for transformation. Last year closed with cooling prices in some regions, higher borrowing costs, and affordability pressures that reshaped buyer and investor behavior.
This year, we’re entering what could be a buyer’s market, with opportunities emerging in undervalued suburbs, regional growth hubs, and rental hotspots. The interplay of interest rates, migration trends, and government initiatives will define the market, while investors and buyers navigate a landscape of challenges and opportunities.
In this edition, we’ll explore the latest market forecasts, highlight key strategies for success, and outline why 2025 could be a pivotal year for savvy property investors.
Quick heads-up: Before we get into the details, we wanted to share something important.
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Modest Property Gains Expected Amid Interest Rate Shifts in 2025
National residential property prices are forecast to grow by 3% in 2025, driven by anticipated interest rate cuts in the latter half of the year. After nearly two years of steady increases, the market showed signs of cooling, with a 0.1% price drop in December 2024. Major cities like Sydney and Melbourne are expected to see minimal growth or slight declines due to higher stock levels and constrained borrowing capacity.
In contrast, smaller capitals such as Perth, Adelaide, and Brisbane, which saw double-digit growth in 2024, are poised for slower but steady increases, with some estimates suggesting gains of up to 10%. Analysts warn that affordability concerns and subdued buyer confidence—due to economic uncertainty and high mortgage repayments—may temper demand, particularly in premium markets.
Experts predict the first half of 2025 will be subdued, with momentum picking up later in the year if rate cuts ease borrowing costs and improve affordability. However, risks of a global recession and local economic headwinds may keep growth restrained.
So What Are The Factors We Should Watch Which Will Impact Growth?
Interest Rates
The Reserve Bank of Australia (RBA) is expected to maintain a cautious approach to interest rate adjustments in 2025. While some analysts predict potential rate cuts in the latter half of the year, the timing and extent remain uncertain.
Migration
Australia’s population growth, driven largely by immigration, is projected to continue, sustaining housing demand, particularly in urban and suburban regions. This trend is evident in Melbourne’s outer suburbs and Sydney’s fringe areas, where increased demand has lead to price appreciation.
Supply and Demand
The government’s ambitious target to construct 1.2 million homes over five years faces challenges, with current building approvals lagging behind the required pace. Supply constraints, coupled with strong demand, are likely to maintain upward pressure on property prices, especially in high-demand areas.
Wages and the Economy
Wage growth is expected to remain moderate, with the RBA forecasting a slight easing. Economic conditions, including employment rates and inflation, will play a significant role in shaping the property market. A stable economy with low unemployment may support buyer confidence, while any economic downturn could dampen market activity.
Government Stimuli and Taxes
Government initiatives, such as the Housing Australia Future Fund and the Help to Buy Scheme, aim to address housing affordability and supply issues. Additionally, infrastructure investments are expected to unlock new opportunities in regional and outer metropolitan areas, potentially enhancing property values.
Market Outlook
Overall, the Australian property market in 2025 is projected to experience moderate growth, with regional and outer-suburban areas potentially outperforming major cities like Sydney and Melbourne.
Best Property Strategies for 2025
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Focus on Regional and Outer-Suburban Markets
- Target high-growth corridors with planned transport links, schools, and commercial developments.
- Look for suburbs benefiting from population migration or demographic changes.
Why: Affordability constraints and lifestyle shifts continue to drive demand in regional hubs and outer metropolitan areas, especially those with new infrastructure projects.
Strategy:
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Prioritise Properties In Rental Demand Areas With Good Yields
- Invest in properties with strong rental yields. It means the area is in demand and gives you the best opportunity to sell well plus a good plan B and options to hold if you cannot sell.
Why: With interest rates remaining high or only slightly reducing, cash flow management will be critical.
Strategy:
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Adopt a Long-Term Investment Perspective
- Work with properties you could refinance and hold in the event that they do not sell. These properties will give you capital growth over 5-10 years, especially in areas with infrastructure investments.
- Reinvest rental income into additional investments to compound returns.
- Use any uplift in value you create to refinance.
Why: Short-term growth may be slower due to affordability pressures and economic uncertainty, but long-term fundamentals like population growth and housing demand remain strong.
Strategy:
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Leverage Government Incentives
- Research state and federal programs to reduce upfront costs.
- Take advantage of tax benefits, such as negative gearing.
Why: Initiatives like the Help to Buy Scheme and first-home buyer grants can make it easier to enter the market or expand portfolios.
Strategy:
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Look for Undervalued Properties
- Target properties in areas with development potential or that are underpriced compared to nearby suburbs.
- Consider renovation projects to add value and boost rental income.
- Focus on the 4D’s in a buyer’s market like this and seek out motivated vendors – deceased estates, developers under duress, distressed properties, and downsizers.
Why: Rising construction costs and a slow supply pipeline may make established properties in undervalued suburbs a better bet.
Strategy:
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Diversify Your Portfolio
- Balance and diversify across varying dwelling types—residential family homes, apartments, granny flats, rooming houses.
- Explore opportunities in regional and interstate markets to capitalise on varying growth trends.
Why: Different property types and locations help mitigate risks from local market fluctuations.
Strategy:
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Prepare for Rate Movements
- Regularly review mortgage terms to ensure you’re not overpaying.
- Explore loan options as lenders relax lending criteria to compete for fewer buyers as higher rates cool buyer demand.
Why: Interest rate fluctuations can significantly impact borrowing costs and affordability.
Strategy:
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Capitalise on Supply Constraints
- Invest in areas with low housing availability but high rental demand.
- Look for established properties to renovate over new builds to avoid delays and cost overruns.
Why: Limited new housing supply and high construction costs are likely to maintain upward pressure on established property values.
Strategy:
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Monitor Market Trends Closely
- Stay updated on Reserve Bank announcements, government policies, and local economic shifts.
- Use data-driven insights to adjust your investment approach proactively.
Why: Economic conditions, migration patterns, and buyer sentiment will play a significant role in market performance.
Strategy:
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Explore Co-Investment or Syndication
- Partner with other investors or join property syndicates to pool resources.
- Share the costs and risks while accessing larger-scale investment opportunities.
Why: Rising property prices and borrowing constraints may make co-ownership a viable strategy for accessing high-value assets.
Strategy:
Why 2025 Is Shaping Up as A Buyer’s Market
The average Australian household can afford to purchase a home worth 513,000, leaving most properties beyond reach, according to CoreLogic modelling. This figure is well below the national median dwelling value of 815,000, and far from median house prices in Sydney (1.47 mil) and Melbourne (860,000). Only 15.5% of property markets nationwide fall within the affordable range.
High interest rates have eroded borrowing capacity, even as property prices soften in some areas. Suburbs in Sydney and Melbourne’s affluent inner regions, such as Clovelly and East Melbourne, have experienced significant price declines, driven by reduced buyer demand and stretched affordability.
Despite price falls, affordability pressures remain a major hurdle. The combination of rising living costs, limited borrowing power, and high deposit requirements continues to dampen buyer activity.
Investor activity has also slowed, with some selling due to rising taxes on secondary properties.
Australia’s Economic Crossroads:
Australia may be facing significant economic challenges this year. Recent reports from McKinsey & Company—a leading global consulting firm—and the International Monetary Fund (IMF) have highlighted the challenges ahead. Here’s what you need to know:
1. McKinsey’s Warning: An Economy Losing Momentum
- Labour productivity growth has been flat since 2016, with Australia now ranking 30th out of 35 wealthy nations.
- Business investment is at recession levels, stuck around rates last seen in the 1990s.
- Government-dominated industries, such as aged care and public services, have seen no productivity improvement in 20 years, while costs continue to rise.
The report calls Australia an “economic problem child” that has grown complacent after decades of prosperity. As McKinsey warns, “The golden goose that produced our fair and prosperous society is gasping for air.”
What this means for you: With productivity stagnating and costs rising, the economy is offering fewer opportunities for growth and wealth creation. It therefore makes sense to assert some control over your financial future by mastering high-value skills, like property investment, that allows you to thrive in any economic condition.
2. Housing Affordability: A Global Crisis in Our Backyard
- Sydney ranks as the second most unaffordable city globally, requiring 13.8 times the median household income to buy a home.
- Melbourne, Adelaide, Brisbane, and Perth are also in the top 20 most expensive cities in the world.
- Younger Australians are increasingly locked out of home ownership, with rates dropping sharply for under-40s.
The IMF has placed Australian housing among the least affordable in the world:
While governments aim to address this with housing targets and infrastructure spending, systemic reforms like stamp duty replacement and zoning rule relaxation are years away.
3. Inflation and Interest Rates: Prolonged Uncertainty
- A strong labour market, with unemployment at just 3.9%.
- Record government spending, which adds heat to the economy.
The IMF has warned that inflation could stop falling, driven by:
As inflation persists, interest rates may remain higher for longer, delaying relief for households and businesses.
Your Roadmap to Success in 2025
As 2025 begins, understanding the factors shaping the property market is crucial. While affordability remains a hurdle for many, strategic planning and adaptability can turn challenges into opportunities.
At Property Edge, we’re committed to bringing you timely insights and actionable strategies to help you thrive in the evolving market. Let’s make 2025 a year of growth, opportunity, and success in property investment.
Important Reminder:
Our research tool helps you find off-market motivated sellers and calculates potential flipping profits. We have a handful of trial licences available now! No credit card required.
