Perth, Adelaide and Brisbane house prices expected to soar in 2025
Perth, Adelaide and Brisbane are forecast to see the biggest increases in property prices by 2025, with chronic undersupply of housing and upcoming interest rate cuts worsening affordability.
Despite continued cost pressures for buyers, demand for homes will continue to drive up prices across the country, online real estate marketplace Domain predicts in its 2024 year-end report released Thursday.
The traditionally dominant duo of Sydney and Melbourne are expected to experience lower price growth than the ‘silent performers’ as buyers flock to smaller cities where values come from lower levels, said Nicola Powell, head of domain research and economics.
“You tend to see stronger growth coming out of those larger capital cities… but what we have seen in 2024 is Perth, Adelaide and Brisbane which have been the standouts and that trend is not expected to change. 2025,” Dr. Powell to AAP.
Lower supply and tighter rental markets contributed to faster growth in smaller cities, with house prices expected to rise between five and seven percent in Brisbane, seven to nine percent in Adelaide and eight to ten percent in Perth, compared to growth of four percent. nationally to six percent.
But price growth is still expected to be significantly slower than in 2024, with house prices in Perth rising by more than 20 per cent in the past 12 months.
Despite the Reserve Bank of Australia keeping interest rates higher than expected and unaffordability keeping out many buyers, the market showed ‘remarkable staying power’.
“That resilience was really on display in 2024,” Dr. Powell said.
It is expected that property prices will continue to rise in a number of capitals
“We’re caught between high interest rates and a housing shortage… and that shortage won’t be solved in 2025.”
Dr. Powell expects 2025 to be a year of two halves, with softer spring sales continuing into the fall before an expected start of rate cuts mid-year triggers a spike in demand and stronger price growth in the second half.
Melbourne is predicted to be one of the slowest growing capital cities, with house prices expected to rise between three and five percent and a slight decline in unit prices.
The softer market partly reflects investors pulling out of Victoria after the state government introduced controversial taxes on investment properties and holiday homes.
First home buyers accounted for a larger share of purchases, as the government intended, Dr. Powell said.
Experts say Melbourne’s housing market is lagging behind some other capital cities.
But the policy’s effectiveness was hampered by its impact on affordability for tenants, as lower investment activity feeds into rental supply, she said.
‘The core of this must be the supply and the focus on building more homes and achieving those 1.2 million homes (Housing Agreement target).’
Rent growth is slowing, with capital city rents rising 5.3 per cent in the 12 months to November – the slowest annual change since April 2021 – according to CoreLogic.
That reflects weaker demand for rental properties as strained affordability encourages renters to form more shared housing or discourages young Australians from moving out of the family home, says CoreLogic economist Kaytlin Ezzy.
“This is reinforced by the RBA reporting on average family size, which has risen in the capitals,” she said.
‘Rental growth may recover somewhat in the seasonally strong first quarter of 2025, but outside all seasonal influences it increasingly appears that the rental boom is over.’