Western Australia<\/strong>: A remarkable 235% higher, though this is from a very low base.<\/li>\n<\/ul>\nLooking ahead to 2025, affordability and borrowing capacity will continue to be key factors shaping the property market.<\/p>\n
These dynamics are likely to sustain strong demand in more affordable markets like Queensland, Adelaide, and Perth.<\/p>\n
Interestingly, some lenders have already begun quietly relaxing credit policies, such as offering longer loan terms and requiring less paperwork, to enhance borrowers\u2019 capacity.<\/p>\n
Given that the banking regulator has indicated it\u00a0won\u2019t reduce the 3% loan buffer, I anticipate more lenders will adjust their credit policies to support borrowing.<\/p>\n
This should help underpin loan volumes.<\/p>\n
However, tight borrowing capacity will remain a dominant theme, further driving demand in affordable markets throughout 2025.<\/p>\n
Housing supply and the federal election<\/h3>\n
Housing affordability is set to be a key issue in this year\u2019s federal election, as it often is.<\/p>\n
Federal elections can impact property markets, particularly if a major political party proposes significant policy changes.<\/p>\n
From what I understand, the ALP has ruled out any changes to capital gains tax (CGT) or negative gearing, providing some certainty for property investors.<\/p>\n
On the other hand, the Coalition appears likely to introduce a policy allowing first-home buyers to access their superannuation to help purchase a home.<\/p>\n
Policies like this can have a real influence on the property market, particularly in the short term, as they can affect buyer demand and sentiment.<\/p>\n
![\"Interest](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2023\/08\/interest-rate2.jpg\")
<\/p>\n
Will interest rate cuts have a big impact?<\/span><\/h2>\nIt\u2019s widely expected that the RBA will begin cutting interest rates in 2025, with most commentators predicting the first cut around mid-year.<\/p>\n
Money markets have already priced in three 0.25% rate cuts for 2025.<\/p>\n
Even if rates are reduced by 0.75% in total, we shouldn\u2019t overestimate the impact on borrowing capacity.<\/p>\n
For most people, borrowing capacity would only increase by about 5% to 10%.<\/p>\n
However, the real impact of rate cuts will be felt by existing borrowers, particularly those carrying significant debt, as their repayments reduce.<\/p>\n
There\u2019s no doubt in my mind that lower interest rates will fuel demand for property and, in turn, drive price growth.<\/p>\n
Expectations of future rate changes beyond 2025 could also influence the property market.<\/p>\n
As it stands, money markets aren\u2019t pricing in any additional cuts beyond the three expected next year.<\/p>\n
However, if those expectations shift \u2013 whether toward more cuts or potential hikes \u2013 it could have a significant impact on property prices.<\/p>\n
A medium-term outlook is more helpful<\/span><\/h2>\nWhile it\u2019s interesting to speculate on how property prices might change in 2025, I believe it\u2019s far more valuable to focus on the medium-term outlook, say the next 3 to 7 years.<\/p>\n
Short-term price movements are almost impossible to predict with high conviction.<\/p>\n
However, the longer the time horizon, the more predictable market trends become.<\/p>\n
This chart\u00a0highlights that property markets typically move in two distinct cycles: a flat cycle followed by a growth cycle. I\u2019ve studied every flat and growth cycle since 1980.<\/p>\n
![\"Distribution](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2024\/05\/Distribution-of-median-house-price-growth-1980-2023-800x594.png\")
<\/p>\n
Growth cycles since 1980<\/h3>\n
The table below includes all growth cycles since 1980.<\/p>\n
On average, these growth cycles last about 10 years (the shortest is 4 years and the longest is 20 years).<\/p>\n
![\"Growth](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2025\/01\/Growth-cyle-since-1980-800x379.jpg\")
<\/p>\n
This data provides valuable context for evaluating whether current growth cycles are nearing their completion:<\/p>\n
\n- Perth<\/strong>: The growth cycle began less than 2 years ago, with prices increasing by approximately 40% so far.<\/li>\n<\/ul>\n
\n- Adelaide<\/strong>: The growth cycle started 5.5 years ago, with prices rising by over 70% during that period.<\/li>\n<\/ul>\n
\n- Brisbane<\/strong>: Similarly, Brisbane\u2019s growth cycle began 5.5 years ago, with prices also up by over 70%.<\/li>\n<\/ul>\n
\n- Sydney<\/strong>: The growth cycle started less than 4 years ago, but prices have only increased by 26% over that time.<\/li>\n<\/ul>\n
This analysis suggests that Perth\u2019s growth cycle is still in its early stages and is likely to continue for several more years.<\/p>\n
Adelaide and Brisbane appear to be beyond the halfway point of their cycles. Sydney, however, is harder to assess and remains less clear.<\/p>\n
Flat cycles<\/h3>\n
The table below includes all flat cycles since 1980.<\/p>\n
On average, these flat cycles last about 8-9 years (the shortest is 7 years and the longest is 12 years).<\/p>\n
![\"Flat](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2025\/01\/Flat-cycles-800x283.jpg\")
<\/p>\n
Melbourne\u2019s flat cycle began 8 years ago, during which the median house price has declined by an average of 2.4% p.a. in real terms \u2013 that is, after adjusting for inflation.<\/p>\n
This is substantially more than any previous flat cycles, except in Sydney between 1989 and 1996 where prices fell by 2.8% p.a. in real terms.<\/p>\n
This analysis suggests that Melbourne is likely getting close to the end of its flat cycle.<\/p>\n
What to expect in 2025?<\/span><\/h2>\nI expect 2025 to bring more of the same.<\/p>\n
The RBA is likely to remain cautious with interest rates and given the strength and resilience of the employment market, I think the likelihood of more than three rate cuts is slim.<\/p>\n
While rate cuts will provide some stimulus to the property market, I don\u2019t anticipate a significant impact, as mortgage volumes are already quite high.<\/p>\n
I also don\u2019t believe the federal election will disrupt the property market.<\/p>\n
If there isn\u2019t a material increase in forced property sales, and I don\u2019t expect there will be, I think Melbourne\u2019s prices will hold up relatively well.<\/p>\n
My 2025 predictions:<\/p>\n
\n- Perth<\/strong>: Once again, the strongest performer, with another year of double-digit growth.<\/li>\n<\/ul>\n
\n- Brisbane and Adelaide<\/strong>: Both set for strong years, with high single-digit growth.<\/li>\n<\/ul>\n
\n- Melbourne and Sydney<\/strong>: Likely to lag, with price movements ranging from -3% to +3%.<\/li>\n<\/ul>\n
Slow markets can deliver better opportunities<\/span><\/h2>\nIn the long run, a high-quality, investment-grade property is likely to deliver strong returns, no matter which capital city it\u2019s located in.<\/p>\n
That said, it\u2019s always smarter to invest with an eye on maximising both medium and long-term returns.<\/p>\n
Right now, I believe Melbourne is the most attractive market.<\/p>\n
It\u2019s likely to enter a growth cycle within the next 1 to 4 years, and softer markets often provide excellent buying opportunities due to reduced competition from other buyers.<\/p>\n
<\/div>\r\n
<\/div>\n","protected":false},"excerpt":{"rendered":"
It\u2019s always fascinating to explore how property prices might move over the coming year. While short-term price fluctuations aren\u2019t particularly relevant for long-term investors, this kind of analysis can be incredibly useful for those planning to sell or buy property in 2025. Last week, I joined James Kirby on\u00a0The Australian\u2019s\u00a0finance podcast to dive into this…<\/p>\n","protected":false},"author":9,"featured_media":177796,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[54,3],"tags":[],"class_list":["post-187612","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-property-updates","category-property-investment"],"acf":[],"yoast_head":"\n
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![\"Property](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2022\/05\/property-market-2-800x502.jpg\")
<\/p>\n![\"Loan\"](\"https:\/\/cdn.propertyupdate.com.au\/wp-content\/uploads\/2023\/08\/loan.jpg\")
<\/p>\n