Australian home prices are expected to rise over FY25, driven by constrained supply, high construction costs, and strong migration. Affordability and serviceability pressures from high interest rates and the cost-of-living crisis remain significant, limiting growth potential in some markets. However, population growth and limited housing supply continue to underpin property prices.
The interplay between affordability challenges and supply constraints will shape the market, with house prices generally outpacing unit price growth in most cities. Regional areas near metropolitan hubs will remain attractive to those priced out of major cities.
Key Forecasts
House Prices
- Sydney: Expected growth of 6%-8%, reaching $1.73M–$1.76M by FY25.
- Melbourne: Modest growth of 0%-2%, with prices stabilizing at $1.03M–$1.05M.
- Brisbane: Growth of 6%-8%, potentially making Brisbane a million-dollar city by FY25.
- Adelaide: Expected growth of 7%-9%, nearing $1M.
- Perth: Leading the nation with 8%-10% growth, reaching $840K–$856K.
- Canberra: Mild recovery with 0%-4% growth, remaining below pre-2022 levels.
- Regional Areas: Growth between 0%-3%, driven by demand from metropolitan spillover.
Unit Prices
- Sydney: Growth of 4%-6%, setting new records at $838K–$855K.
- Melbourne: Growth of 2%-4%, reaching $575K–$587K, outpacing house price growth.
- Brisbane and Adelaide: 4%-6% growth, reaching new highs of $572K–$583K and $509K–$519K, respectively.
- Perth: Steady growth of 4%-5%, reaching $443K–$447K.
- Regional Areas: Unit price growth between 1%-4%, with stronger demand in areas close to cities.
Population Growth: Strong migration is driving housing demand, compounded by smaller household sizes and a rise in single-person households.
Constrained Supply: Weak building approvals, land shortages, and high construction costs are limiting new housing supply.
Borrowing Power: Stage 3 tax cuts and potential interest rate reductions in mid-FY25 could boost borrowing capacity and homebuyer demand.
Challenges To Growth
- Affordability Pressures: Rising living costs and slow wage growth are pricing out many buyers.
- Rising Unemployment: Expected to increase to 4.5% in FY25, which could dampen demand, especially in mortgage-belt suburbs.
- Consumer Sentiment: Persistently high inflation and interest rates may further erode buyer confidence, delaying home purchases.
Regional Insights
- Migration policy changes, including the removal of the “designated regional area” incentive, may shift demand back to metropolitan areas.
- Proximity to cities will remain a key driver for regional market growth, while remote regions may see reduced demand.
Upward and Downward Price Pressures
- Upward: Population growth, constrained supply, and increased borrowing power.
- Downward: Affordability challenges, rising unemployment, and pessimistic consumer sentiment.
Summary of Forecasts
- Combined Capitals: House prices up 4%-7%; unit prices up 3%-5%.
- Combined Regionals: House prices up 2%-3%; unit prices up 1%-3%.
Partner with Positive Income Properties
At Positive Income Properties, we offer tailored investment opportunities designed to maximise returns and provide passive income. Whether you’re entering the market for the first time or expanding your portfolio, we’re here to guide you every step of the way.
Call or email us today to learn how we can help you secure your financial future with high-performing properties and to discuss how our tailored land and build packages can provide you with financial security and consistent returns, regardless of financial shifts.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
