REA Group expects property price growth to moderate in 2025
After several years of rapid property price increases, REA Group expects the housing market will moderate during 2025 to just 4 per cent growth.
Delays to interest rate cuts and the upcoming federal election will contribute to a weaker housing market through 2025, according to new forecasts.
REA Group’s biannual PropTrack Property Market Outlook predicts prices will increase by 4 per cent nationally over the coming 12 months, with the mid-sized cities expected to outperform the rest of the country.
It represents a further moderation of price gains from the heights of the pandemic boom, with forecasts below the 5.5 per cent increase recorded in 2024 and the 6.9 per cent rise the year prior.
REA Group director of economic research Cameron Kusher said he expected the second half of 2025 to be stronger than the first.
“The main reason why we expect slower price growth next year is a lot of people were expecting interest rate relief this year which never came,” he said.
“We’re probably not going to get that interest rate relief until May, that’s eight, nine months later than people were expecting.
“That has the potential to bring more properties on to the market, but also it means that fewer people are probably going to be looking to purchase properties.
“That will lead to slower price growth, more choice for the people that are there buying, you know, tougher conditions for vendors that are looking to sell.
“We also know that the federal election usually sees the market slow down quite a bit, so that’s a consideration for the first half of next year.”
Prices in Perth and Adelaide could grow 3-6 per cent in 2025 after recording respective gains of 18.7 per cent and 14.6 per cent this year. Brisbane is predicted to rise 2-5 per cent.
The rise in the number of homes listed for sale has dampened outlooks in the two major capitals, with Sydney only forecast to pick up 1-4 per cent.
Melbourne is the only capital with a chance of slipping next year as investors flee the market, with prices potentially landing between a fall of 1 per cent and rise of 2 per cent.
The smaller capitals of Hobart, Canberra and Darwin are each expected to rise up to 3 per cent.
The expected rate cut will allow the average homeowner to save about $100, with REA Group and three of the big four banks expecting the Reserve Bank to first move in May.
A further one or two cuts may eventuate in the second half of the year.
Analysis by RateCity for The Australian shows that a household with a mortgage of $500,000 will have a $76 drop in repayments from one rate cut in May, which increases to $115 for a household with a $750,000 home loan and $153 for those paying off $1m.
While REA Group did not make a formal regional market forecast, Mr Kusher said the segment was currently outperforming the capitals.
The total number of homes for sale rose in most capitals this year and reached decade-highs in Sydney and Melbourne, which resulted in the national median time for a home to sell push out from 27 days in November 2023 to 34 days a year later.
Properties have not taken this long to sell on average since September 2020, when excluding the typical January slowdown.
More Coverage
Why parents are sending themselves broke
Aussie parents are putting their financial futures on the line as their support becomes a virtual essential for their adult children to make this key purchase.
Mea culpa: My worst investment mistakes and how to avoid them
You can be your own worst enemy when it comes to successful investing, so learn from my mistakes with this guide of what not to do.