- March 2025
Important figures all property investors need to know:
A Market in Motion: Sales and Supply Dynamics
As we move through the early months of 2025, Australia’s housing market remains under significant pressure, with demand far exceeding supply. Currently, only 165,000 dwellings are listed for sale, despite 640,000 properties changing hands over the past year. This translates to just 3.1 months of available supply—well below the 5–6 months typically seen in a balanced market. The scarcity of listings has intensified competition, fuelling bidding wars and pushing prices even higher.
Property Values: A Persistent Climb
Housing values have seen remarkable growth over the years. Detached houses have surged 3.6 times since 2000, with an annual appreciation rate of 6.9%, while apartments and townhouses have seen a 2.5x increase, growing at 5.5% per annum. The median house price in capital cities now exceeds $1 million, while apartments average around $654,000—a reflection of sustained demand and constrained supply.
The Tightening Rental Market
With a residential vacancy rate of just 1.3%, Australia’s rental market is under immense pressure. This scarcity has pushed median weekly rents for three-bedroom houses to $600, marking a twofold increase since 2000 at an annual growth rate of 4.7%. Tenants are finding it increasingly difficult to secure affordable rentals, adding to the urgency for new housing supply.
Population Growth: A Key Driver of Demand
Australia’s population grew by 650,000 people in 2024, driven by overseas students (59%), net migration (24%), and natural increase (17%). Growth was concentrated in Victoria (+165,100), New South Wales (+143,200), Queensland (+125,800), and Western Australia (+81,400), which together accounted for 94% of the total increase.
Looking ahead, the population is projected to grow by 2.3 million by 2030, with an annual increase of 470,000 over the next five years and 395,000 per year over the next decade. This surge will require 1.2 million new dwellings (240,000 per year), with 80–90% of demand in NSW, Victoria, Queensland, and WA.
With supply already tight, housing demand will continue to outpace availability, pushing prices higher and increasing pressure on policymakers to boost development and
What’s Fueling Price and Rental Growth?
Three major forces continue to shape the market:
Wealthy international buyers—High-net-worth individuals from China, India, and Southeast Asia are increasingly investing in Australian real estate.
Soaring construction costs—The average cost to build a new dwelling has reached $550,000, with annual increases of 6.7%.
Persistent housing undersupply—New home completions average 172,000 per year, falling short of the estimated demand of 187,000 annually.
Economic Conditions and Interest Rates
Interest rates remain a crucial factor in housing affordability. The Reserve Bank of Australia (RBA) has maintained the cash rate at 4.35%, but forecasts suggest up to six 0.25% cuts between mid-2025 and late 2026. However, mortgage rates above 5% are expected to become the norm, limiting affordability gains from falling rates.
Employment Trends and Housing Affordability
The job market has softened, with 404,000 new jobs created in 2024, marking a 99,000 decline from the previous year. Notably, 65% of these jobs were in government-aligned industries, raising concerns over the sustainability of employment growth in the private sector. Slower wage growth combined with high housing costs continues to challenge affordability for many Australians.
Market Projections for 2025 and Beyond
Home prices expected to grow by 5% to 8% per annum over the next year.
Rental growth projected at 8% to 15% per annum, driven by low vacancy rates.
A shift toward multi-tenant properties as affordability pressures mount.
Falling interest rates could ease borrowing costs, but structural supply issues may keep property prices elevated.
As 2025 unfolds, Australia’s housing market is at a critical juncture. With population growth surging and housing supply struggling to keep pace, prices and rents are likely to continue their upward trajectory. While falling interest rates may offer some relief, affordability remains a pressing concern. The need for strategic policy intervention and increased housing construction has never been more urgent. The road ahead will be shaped by a delicate balance between economic conditions, market demand, and the capacity to build enough homes to meet Australia’s ever-growing needs.
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I want to share with you an excerpt from a letter I received this past week—it was so profound and impactful that I couldn’t keep it to myself.