Navigating the 2025 Australian Property Market: Risks and Rewards

The 2025 Australian property market was always going to be a topic of lively discussion, but interest rates and the cost of living has really added spice to the equation.

COVID saw big swings in property values in many areas of the country. Initially this appeared to be fueled by panic and later a realisation that many Australians did not need to live so close to their place of work. This saw a shift in many locations and a surprise regional surge in high demand areas. Meanwhile, blue-chip areas of major cities continued to grow at historical rates, seemingly oblivious to national trends.

Whether you’re a first-time buyer, a seasoned investor, or just trying to make sense of the market chaos, understanding what’s driving the change (and where the risks lie) is key.

 

National Snapshot: What’s Happening Across Australia Right Now

Australia’s housing market grew to a new peak in May 2025, with cotality (formerly CoreLogic) publishing national dwelling values up 3.3% over the past 12 months. It’s also noted that nationwide, growth figures seem to be coming back into line and consequently lifting the median home price to $831,288.

But the real story lies beneath the surface.

Some may argue that capital city growth is slowing over the long term. The Melbourne property market has struggled for the last few years. Consequently, it has fallen behind Adelaide, Perth and Canberra and now ranks sixth among the capital cities for median dwelling value.  However at the same time, Brisbane, Adelaide and Perth have experienced explosive growth in the same period with double digit annual growth in the last 12 months.

 

Cotality Median Dwelling Values

source: cotality (formerly CoreLogic)

 

So does this mean you should be rushing to these capitals in order to invest?

Well… not exactly.

You see, capitals like Perth may have cashed in on the latest growth, though prior to this current period of price rises, Perth was in a decade long “funk” when it came to housing prices. Unless you purchased at just the right time, or held on to an underperforming investment for a very long period with little to no growth, chances are you (like the rest of us) would have missed out.

And despite what your next door neighbour says, if they (or anyone else) were able to predict market shifts like this, I’m sure they’d be living a much more lavish life than they do. Hindsight is a wonderful thing.

While all this is going on in other capitals though, Sydney boasted an annual growth figure of 4%, which is far closer to the long term average around 6%. However, according to local real estate agents, this figure can vary wildly. It all depends on which part of Sydney you are in and what type of property you are looking to buy or sell.

 

 

What’s Fueling the 2025 Australian Property Market?

Realistically, it’s all speculation, though the obvious triggers right now are:

• Interest rate cuts
• Inflation
• Cost of living

In February and May of this year, the RBA made two interest rate cuts following 13 rate hikes between May 2022 and November 2023. That move injected new life into buyer sentiment, particularly in lower-priced and regional markets.

However, just when you think an interest rate cut might mean it’s a great signal for you to enter the market with higher borrowing capacity, the same applies to everyone else too. This often triggers short-term growth spikes in popular areas and is certainly something all buyers need to consider.

But rates aren’t the only factor.

 

Other Factors

Population growth is back in a big way. With net overseas migration rebounding, housing demand is under pressure. Australia added nearly 660,000 people in the past 12 months alone, pushing up competition in both rental and buyer markets.

Investor activity is also on the rise with lending up along with increased mortgage approvals. We’re also seeing first-home buyers re-enter the frame, spurred by government support and reduced competition in some areas.

According to the RBA, inflation is now being held in a more stable position, though threats of the Trump administration’s tariffs are still casting a shadow over things. Recent notes from the latest RBA meeting show the board is cautious of the impact of trade implications and thus chose for a 25 basis points rate cut instead of a 50 basis point cut.

And finally, all the water cooler talk remains about the cost of living. Is it a “crisis”? Who knows. What we can be sure of is that many people are talking about how it’s hitting home right now as we continue to deal with a post pandemic economy.

 

Risks to Watch: Don’t Be Caught Off Guard

Despite the headlines of nationwide growth and reduced interest rates, this isn’t a “buy anything, get rich” market (nor does one ever exist). The risks are very real. Here are 4 things we always talk about with our clients:

1. Market volatility
We’re seeing rapid changes across all markets (and it’s not always the same changes either). What looks like value today can (and often does) shift quickly. Investors now need to be more strategic than ever before.

2. Affordability pressure
It’s clear for even the uneducated that wages aren’t keeping pace with house prices. In some areas, even small increases can push borrowers out of the game.

3. Supply shortfalls
Dwelling approvals are down 18.3% year-on-year, and completions are lagging behind government targets despite the latest initiatives. This tightens the market further but also raises risks for overvalued segments.

4. Economic uncertainty
Job growth certainly appears to be stabilising. However any downturn from the trade wars could expose vulnerabilities in over-leveraged buyers or speculative investments.

 

Australia’s Unemployment Rate

 

How to Make Smart Moves in a Shifting Market

With the right strategy, there’s still significant upside if you are able to navigate the 2025 Australian Property Market. But timing and execution are everything.

If you’re a first-time buyer:

• Focus on value areas with long-term infrastructure growth
• Be wary of market hype and make sure you get expert advice before making any decisions

If you’re an investor:

• Consider your risk tolerance and investment horizon, then assess opportunities accordingly
• Consider cash flow yield along with capital gain. Create specific spreadsheets so you understand the benefits and consequences of each
• Speak with a lending adviser about structuring interest effectively. Remember that the lowest interest rate isn’t always the smartest choice

And above all… be proactive, not reactive.

 

Stay Sharp and Get Expert Advice

The most important feature of the 2025 Australian Property Market is that although there are opportunities, there are also many “shiny objects” that could turn out to be expensive money pits.

Don’t chase missed gains from the past. Think long term, if that’s your strategy.

Some smart finance structuring can mean the difference between setting yourself and your family up for life and simply plodding along.

Get your personal questions answered. Click here to connect with a lending adviser who understands what you do and can show you lending options you would never find time to consider for yourself.