Interest rates to shape property market throughout 2025
Experts have predicted that the Australian property market will thrive with both higher listings and buyer demand.
According to LJ Hooker Group’s head of research, economics and business intelligence, Mathew Tiller, Australia’s property market is expected to remain active in 2025, driven by an above-average number of listings and continued buyer demand.
However, Tiller highlighted that the market’s performance will depend on when the Reserve Bank of Australia (RBA) will reduce interest rates.
Tiller projected that over the coming year some Australian home owners will capitalise on recent price growth, while factors such as strong population growth, steady employment, rising wages, low rental vacancy rates, and a shortage of new housing will sustain buyer interest.
“Interest rates will heavily influence market performance in 2025, and the impact will be dependent on the timing and depth of rate cuts,” Tiller said.
Tiller stated that the RBA is unlikely to adjust rates before May due to persistent inflation and global economic uncertainty.
“An earlier announcement and a significant reduction will likely strengthen the market, while prolonged rate stability at elevated levels may soften conditions.”
Tiller noted that some buyers are moving early to secure properties ahead of expected interest rate cuts, anticipating increased competition in the market, while others are holding off in hopes of improved borrowing capacity and easing household budget pressures.
Property price growth is expected to remain uneven across different regions, property types and price points, presenting varying opportunities for buyers and sellers nationwide.
LJ Hooker Group identified suburbs with new infrastructure, transport links and housing supply are key growth areas for 2025, highlighting Wattle Grove and Blacktown in Sydney, Springfield Lakes in Brisbane, and Hillcrest in Adelaide.
According to LJ Hooker Group, the federal election is expected to have minimal impact on the housing market, with both major parties lacking transformative housing policies.
Tiller calls for government action to address Australia’s housing supply challenges, emphasising the need for direct funding for housing projects, streamlined planning processes, reduced taxes and levies, and increased skilled construction worker immigration, particularly in regional areas.
“Government action on housing supply by dramatically improving the feasibility of building new homes will be critical to addressing the longer-term supply imbalance,” Tiller said.
LJ Hooker Group has highlighted that high interest rates have led some investors to offload properties, particularly in Victoria, where new taxes and regulations have impacted profitability.
The agency noted that others are shifting focus to high-growth regions in South Australia, Western Australia, and south-east Queensland.
Tiller expects the Australian property market will remain active over the next 12 months, emphasising the recent strong capital gains that have encouraged owner-occupiers to consider downsizing or leveraging high sales prices.
“Sellers who act early may capture motivated buyers in the post-holiday period, while those waiting for rate cuts could benefit from increased competition and potential sales price growth,” he said.
“Buyer demand remains solid, albeit concentrated in more affordable areas of the market, and this is true for investors, too.”
LJ Hooker Group’s 2025 state and territory outlook
NSW:
Investor and owner-occupier activity will be strong in high-listing areas, while first home buyers are expected to focus on outer suburbs.
Metro hotspots: Mosman, Freshwater, Blacktown, Wattle Grove
Regional hotspots: Orange, Warrawong
VICTORIA:
Rental yields and affordability improvements are set to draw interest from investors and first home buyers.
Metro hotspots: Werribee, Frankston
Regional hotspots: Geelong, Ballarat
QUEENSLAND:
Infrastructure projects leading up to the 2032 Olympics are attracting investors and interstate migrants, supporting above-average price growth.
Metro hotspots: Coorparoo, Springfield Lakes
Regional hotspots: Toowoomba, Nambour
SOUTH AUSTRALIA:
Affordability and lifestyle appeal in Adelaide will sustain demand, with moderate price growth expected as listings increase.
Metro hotspots: Hillcrest, Seacliff
Regional hotspots: Port Lincoln
WESTERN AUSTRALIA:
Strong rental yields will continue to attract investors, though new housing supply and listings will remain limited. A solid economic activity will see price growth remain strong.
Metro hotspots: Innaloo
Regional hotspots: Busselton, Geraldton
TASMANIA:
Market stability is expected in 2025, with activity expected to pick up as interest rates decline. There is an expected demand for retirees and lifestyle buyers seeking affordability in regional and coastal areas.
Metro hotspots: Kingston
Regional hotspots: Devonport, Launceston
NORTHERN TERRITORY:
Low energy prices and investment in energy, mining and defence sectors are expected to drive market activity.
Metro hotspots: Parap, Zuccoli
Regional hotspots: Braitling
ACT:
Expected continued demand from public sector employees and contractors, with investor confidence expected to rise post-election with potential rate cuts.
Metro hotspots: Kambah, Wright, Amaroo