Is 2025 a good time to buy real estate in Australia?

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Everything you need to know is included in our Australia Property Pack

Are you thinking of investing in real estate Down Under? Are you unsure if now is a good time to make a move?

Various opinions exist regarding market timing. The Australian real estate agent you consulted might advise you to buy property now, whereas your relative who actually resides in Sydney may suggest waiting for more favorable market conditions.

At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Australia, we base our work on reliable data and statistics, rather than relying on subjective opinions or hearsay.

We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Australia.

We hope you find this article insightful!

How is the property market in Australia now?

Australia is, today, one of the most stable countries in the world

Positive

Stability is the first factor to look at because it safeguards against market fluctuations and economic uncertainties, making it vital for real estate investment decisions. It is an information you need as a foreigner buying a property in Australia.

You probably already know that Australia is incredibly stable. The last Fragile State Index reported for this country is 19.6, which extremely high.

Australia's stability is largely attributed to its robust democratic institutions and strong rule of law, which ensure effective governance and the protection of individual rights. Additionally, its diverse and resilient economy, bolstered by abundant natural resources and strategic trade relationships, provides a solid foundation for sustained economic growth and social stability.

Investors can definitely rely on the country's stability for investment. Let's review the economic outlook.

Australia will grow at a moderate pace

Positive

It's better to check the country's economic viability before deciding on a property purchase.

In accordance with IMF projections, Australia is set to conclude 2024 with a growth rate of 1.5%, which is positive. Regarding 2025, we're talking 2.1%.

This steady growth might keep going since Australia's economy is expected to increase by 9.1% during the next 5 years, resulting in an average GDP growth rate of 1.8%.

A moderate growth rate in Australia suggests a stable and less volatile property market, reducing the risk of sudden price drops for investors. Additionally, steady growth can lead to consistent returns over time, making it a reliable investment choice.

However, GDP growth is not the only metric to look at.

Australian business owners have a neutral outlook towards market conditions

Neutral

While the GDP forecast is a valuable indicator, it may not fully capture the local sentiment as it relies on external projections. Fortunately, in Australia there is an official metric that is frequently communicated. It's not the case for every country, so we're lucky.

The Business Consumer Index (BCI) is a tool used to measure the confidence of business leaders in the economic conditions, both currently and in the future. It relies on surveys and assessments to gather this information.

The National Australia Bank's data indicates that the Business Confidence Index is currently -4 for Australia. It is definitely a small score.

There hasn't been significant change, considering that the BCI score, 12 months ago, registered at 1.

The Business Confidence Index (BCI) is currently at a minimal level in Australia, similar to the situation in many other countries. Despite this, it's important not to overlook the potential opportunities in the Australian property market. A minimal confidence score often signals a temporary phase of uncertainty or caution, which is a typical aspect of economic cycles.Let's now examine other data to determine if it's a good time to invest in Australia.

Australia is issuing less building permits

Negative

If you're thinking of investing in property in a country, it's helpful to take into account the quantity of construction permits granted. More building permits being delivered implies a rising demand for properties and a thriving market.

Unfortunately, the number of building permits issued is decreasing in Australia.

Over the past year, according to Australian Bureau of Statistics, the number of building permits delivered by the Australian municipalities fell by 9.4%, from 212,905 to 192,956 units.

This is definitely a red flag. Let's consider more data to get a better understanding.

One last thing to note though. Less building permits means less real estate supply. If it's the case, then property prices will increase in Australia in 2025.

Australia's population is growing and getting (a bit) richer

Positive

When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:

• a growing population means more people needing homes
• a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Australia, the average GDP per capita has changed by 4.0% over the last 5 years. The growth, although minimal, is still present. Furthermore, the Australian population is growing (+7% in 5 years).

This means that, if you purchase a spacious house in Sydney and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.

If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in Australian cities such as Sydney, Melbourne, or Brisbane in 2025.

Rental yields are not crazy in Australia

Neutral

Rental yield is a common measure in real estate investing.

It displays the percentage of income you can generate by renting out the property, giving you an idea of its investment value.

According to Numbeo, rental properties in Australia offer gross rental yields ranging from 2.8% and 5.5%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Australia.

It means that the income potential from a real estate investment is relatively moderate.

As we mentioned before, the amount of available real estate will stay the same (and housing prices may be stable), but more wealthy people will be looking to rent properties. Then we can conclude that rental yields might increase in Australia in 2025.

Everything you need to know is included in our Australia Property Pack

In Australia, inflation is expected to be minimal

Neutral

Inflation is the general increase in prices of goods and services over time.

It's when your favorite flat white coffee in Sydney costs 5 Australian dollars instead of 4 Australian dollars a couple of years ago.

If you're about to invest in a property, high inflation can benefit you:

• property values tend to increase over time, leading to potential capital appreciation
• inflation can result in higher rental rates, increasing cash flow from the property
• inflation reduces the real value of debt, making mortgage payments more affordable
• real estate can act as a hedge against inflation, preserving the value of the investment
• diversifying into real estate provides stability during inflationary periods
• tax advantages, like depreciation deductions, can help offset the impact of inflation

As projected by the IMF, over the next 5 years, Australia will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.

This data infers that Australia will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.

Is it a good time to buy real estate in Australia then?

Time to conclude !

While Australia is known for its stability and steady economic growth, 2025 might not be the ideal time to buy property there. The country's economy is projected to grow by 9.1% over the next five years, which translates to an average GDP growth rate of 1.8%. This moderate growth rate suggests a stable property market, which is generally good news for investors. However, it also means that property prices are likely to continue rising steadily, making it more expensive to buy in the future.

Another factor to consider is the decrease in building permits being issued in Australia. With fewer new properties being built, the supply of available homes is likely to become more limited. This reduced supply, combined with a growing population, could drive property prices even higher. As demand outpaces supply, potential buyers might find themselves facing increased competition and higher costs.

Australia's population is not only growing but also becoming slightly wealthier. This increase in wealth can lead to more people entering the property market, further driving up demand and prices. While this might be beneficial for those who already own property, it poses a challenge for new buyers who may find it difficult to enter the market at a reasonable price point.

Lastly, while rental properties in Australia offer gross rental yields ranging from 2.8% to 5.5%, these returns might not be as attractive when considering the rising property prices and the minimal inflation expected in the country. With inflation remaining low, the real value of rental income might not increase significantly over time, potentially limiting the financial benefits of property investment. All these factors combined suggest that 2025 might not be the most opportune time to buy property in Australia.

We hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Australia.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.