Source: CoreLogic
Australia's housing market in 2025 is navigating a pivotal phase influenced by a blend of economic factors that shape its prospects. Inflation remains a dominant force, with underlying pressures keeping interest rates higher for longer, squeezing affordability and reducing borrowing capacity for many households. Although interest rate cuts are expected later in the year, the delay continues to strain mortgage holders and deter first-time buyers.
A resilient labour market, characterized by near-record employment levels, lends some stability, as job security and wage growth instill confidence in property purchases. However, this strength adds complexity, as slightly higher unemployment may be required to control inflation effectively. Meanwhile, robust population growth driven by sustained migration fuels housing demand, particularly in urban areas, further straining an already tight housing supply.
The cost of construction remains a challenge, with significant price hikes over recent years making new homes a premium product. Developers face hurdles in achieving the Federal Government’s ambitious goal of delivering 1.2 million new homes by 2029. Supply chain issues, elevated costs, and financing constraints dampen progress, leaving the market heavily reliant on existing properties.
Mortgage lending trends continue to influence the market, with rising demand for finance pushing prices upward. Yet, affordability concerns and prolonged higher interest rates may moderate this growth in the near term. As the market grapples with these economic forces, stakeholders must adopt innovative strategies to adapt to an evolving landscape. For buyers, investors, and policymakers alike, 2025 promises to be a year of challenges, opportunities, and transformation.
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