How is the property market forecast in Australia?

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Where are Australia's property prices heading in the next 6 to 12 months?

Australia's property prices are set to continue rising through the remainder of 2025, but at a more moderate pace than the previous year.

Nationally, property prices are expected to grow by 3-6% over the next 12 months, with apartments and units likely to outpace detached houses due to affordability constraints. Sydney is projected to see 4-6% growth for both houses and units, while Melbourne expects more modest gains of 1-3% as the market recovers from recent declines.

Brisbane stands out with stronger forecast growth of 9-14% for houses and robust gains for units, making it one of the most attractive markets for investors. Perth is leading the nation with house prices on track for 5-10% growth and unit prices potentially exceeding that figure. Adelaide and Canberra are expected to see steady growth of 2-5%, while Darwin's performance will largely depend on resource sector activity.

As of June 2025, most analysts remain optimistic about price growth being supported by population growth, housing undersupply, and improving buyer sentiment as interest rates begin to fall.

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What are the medium-term and long-term forecasts for the Australian housing market?

The medium-term outlook for Australia's housing market remains strongly positive, with continued price growth expected through 2027.

Over the next 1-3 years, most analysts forecast sustained price appreciation driven by population growth, housing undersupply, and falling interest rates. Sydney and Melbourne are projected to see total price growth of 15-22% for both houses and units by 2027, while Brisbane and Perth are expected to outperform with higher population growth and tighter supply conditions.

The long-term forecast extending to 2030 shows even more substantial gains. Strong population growth, rising incomes, and persistent supply shortages are expected to underpin significant price increases over the next decade. Some economists predict 40-50% cumulative growth in house prices by 2030, with well-located properties historically doubling in value every 7-10 years.

Regional markets are also expected to benefit from tree-change and sea-change trends, infrastructure investment, and relative affordability compared to capital cities. However, performance will vary significantly based on local economic conditions, population growth, and infrastructure development.

The key drivers supporting long-term growth include Australia's immigration program maintaining strong population inflows, chronic housing undersupply that will take years to address, and the country's appeal as a stable investment destination for both domestic and international buyers.

How do property price trends vary across major cities right now?

Property price performance varies dramatically across Australia's major cities, with clear winners and laggards emerging in 2025.

Perth is currently Australia's standout performer, delivering the highest total returns with 10%+ annual growth and a strong rental market. The city benefits from mining sector strength, interstate migration, and relative affordability compared to eastern capitals.

Brisbane continues its strong run with 8-10% annual growth, particularly for units which are outpacing houses. The city's appeal stems from lifestyle factors, job growth, and the upcoming 2032 Olympics infrastructure spending.

Sydney maintains steady but more moderate growth around 4% annually, constrained by affordability limits despite ongoing demand. The price gap between houses and units has reached record highs, making apartments more attractive to buyers and investors.

Melbourne is showing signs of recovery after experiencing -2.3% annual decline, with early 2025 data indicating a turnaround as buyer confidence returns and listings increase.

What's the current supply and demand balance in the Australian housing market?

Australia's housing market faces an extreme supply shortage that continues to drive price growth across most regions.

Supply remains critically tight due to years of underbuilding, high construction costs, and persistent labor shortages in the building industry. New listings have increased in some cities, notably Perth, but overall supply levels remain well below demand, especially in major capital cities. The construction sector struggles with rising material costs, skilled worker shortages, and regulatory delays that limit new housing completions.

Demand continues to outstrip supply primarily due to strong population growth driven by immigration, with net overseas migration remaining high and the government projecting continued robust population increases through 2030. This demographic pressure is particularly acute in Sydney, Melbourne, and Brisbane, where most new arrivals settle initially.

Rental markets reflect this tight supply-demand balance, with vacancy rates at or near record lows in most capitals, often below 1%. This has led to significant rental growth and makes buy-to-hold investment strategies particularly attractive in the current environment.

The supply shortage is expected to persist for several years, as the time lag between planning approvals and completions means current construction activity won't meaningfully address demand until 2026-2027 at the earliest.

It's something we develop in our Australia property pack.

How are interest rates expected to change and impact mortgage affordability?

Interest rates are expected to fall significantly over the next 12-18 months, providing relief for mortgage holders and improving buyer capacity.

The Reserve Bank of Australia's cash rate currently sits at 4.35%, but major banks and economic analysts expect rate cuts to begin in mid-2025, potentially dropping to 3.6% by year-end. This represents a meaningful reduction that will improve borrowing capacity and buyer sentiment across the market.

Lower rates will directly impact mortgage affordability by reducing monthly repayments for new borrowers and providing relief for existing variable rate holders. A 0.75% rate reduction could increase borrowing capacity by approximately 8-10% for typical buyers, bringing previously unaffordable properties within reach.

However, affordability challenges remain significant, particularly in Sydney and Melbourne where median house prices exceed $800,000-$1.6 million. Even with lower rates, buyers will continue to face large repayments relative to income, especially first-time buyers without substantial deposits.

Mortgage serviceability is expected to improve as rates fall, but the combination of high property prices and stricter lending criteria means buyers will still need substantial incomes and deposits to qualify for loans in major capital cities. Regional markets and smaller capitals like Perth and Adelaide offer better affordability prospects even with current interest rates.

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What are the rental yield trends by region and property type?

Rental yields across Australia have improved significantly, offering better returns for property investors compared to recent years.

Brisbane, Perth, and Adelaide are delivering the strongest rental yields, with houses in many regions achieving 3.5-4.5% gross yields. These markets benefit from strong rental demand, relatively affordable purchase prices, and limited rental supply that drives rent growth.

Units and apartments are experiencing stronger yield growth compared to houses due to rising rents combined with slower price growth. This trend is particularly evident in inner and middle-ring suburbs where apartment living appeals to professionals and young families priced out of the house market.

Sydney and Melbourne yields remain below long-term averages due to high purchase prices, despite recent rent increases. However, well-located apartments in these cities can still achieve 3-4% yields, particularly in areas with strong public transport connections and lifestyle amenities.

Regional markets are delivering attractive yields of 4-6% in many areas, though investors need to carefully assess population growth, employment prospects, and rental demand sustainability. Mining towns and agricultural centers can offer higher yields but come with greater volatility risks.

Compared to historical averages, current yields are higher than pre-pandemic levels across most markets, making buy-to-hold strategies more attractive than they've been for several years. This improvement reflects both rental growth and more realistic property pricing in some markets.

Which property types are forecast to perform best in the next few years?

Apartments and townhouses are forecast to outperform detached homes over the next few years as affordability constraints reshape buyer preferences.

Units and apartments are expected to deliver stronger capital growth, particularly in inner and middle-ring suburbs of major cities. This trend is driven by more buyers being priced out of the detached house market and seeking alternatives that offer lifestyle benefits without the premium price tag. Family-friendly apartments in desirable locations with good schools and transport links are particularly well-positioned.

Townhouses represent a middle ground that appeals to buyers wanting more space than apartments but facing affordability constraints with detached houses. Well-designed townhouses in established suburbs are expected to see strong demand and price growth.

Detached homes will remain in high demand, particularly from families and upgraders, but price growth may be more limited by affordability ceilings in major cities. However, premium detached houses in blue-chip suburbs are likely to continue outperforming due to their scarcity and appeal to high-net-worth buyers.

Newer developments with modern amenities, energy efficiency features, and low maintenance requirements are expected to outperform older stock across all property types. Properties with outdoor space, parking, and storage remain premium features that command price premiums.

Investment-grade properties that combine strong rental yields with capital growth potential are expected to be the standout performers, regardless of property type, as investors focus on total returns rather than just capital gains.

What's the outlook for first-time buyers, investors, and downsizers?

Each buyer segment faces distinct opportunities and challenges in Australia's current property market, requiring tailored strategies for success.

First-time buyers continue to face significant affordability challenges but can benefit from increased listings and various government incentives. The best opportunities exist in outer suburbs of major cities and smaller capital cities like Perth and Adelaide. First-time buyers should focus on apartments or townhouses in growth corridors with good transport links and consider shared equity schemes or family assistance where available.

Property investors are seeing improved conditions with better rental yields and strong rental demand making units and well-located houses attractive investments. Brisbane, Perth, and select regional markets offer the best combination of capital growth potential and rental returns. Investors should prioritize properties with strong rental demand, low maintenance requirements, and potential for value-adding improvements.

Downsizers have excellent opportunities to capitalize on strong house price growth to purchase high-quality, low-maintenance apartments or townhouses in established suburbs. The focus should be on lifestyle amenities, accessibility features, and proximity to healthcare and shopping. Premium developments in blue-chip suburbs offer the best prospects for capital preservation and lifestyle enhancement.

All buyer segments should consider timing their purchases to take advantage of expected interest rate cuts while being prepared for continued competition in desirable locations.

It's something we develop in our Australia property pack.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

Which cities or suburbs offer the best value and growth potential right now?

Brisbane and Perth currently offer the strongest combination of value and growth potential for both investors and owner-occupiers.

Brisbane provides excellent prospects with median house prices around $1.02 million, strong forecast growth of 9-14%, and the added benefit of upcoming 2032 Olympics infrastructure investment. Key growth suburbs include gentrifying inner-ring areas, new developments along transport corridors, and established family neighborhoods with good schools.

Perth delivers outstanding value with median house prices of $770K-$856K and forecast growth of 5-10%, making it Australia's most affordable major capital. The city benefits from mining sector strength, interstate migration, and relative affordability that attracts both investors and relocating families.

In Sydney and Melbourne, value seekers should focus on investment-grade properties in affluent, well-connected suburbs that can outperform the broader market. Look for gentrifying inner and middle-ring suburbs, particularly those benefiting from infrastructure upgrades or strong population growth.

Regional markets with strong economic fundamentals, population growth, and lifestyle appeal offer excellent value, particularly in coastal areas within driving distance of major cities. However, careful due diligence is essential to ensure sustainable rental demand and capital growth prospects.

Growth suburbs to watch include those undergoing urban renewal, areas near new transport infrastructure, suburbs with strong employment growth, and locations benefiting from demographic shifts like sea-change and tree-change migration.

How much capital do I need to invest depending on location and property type?

Capital requirements vary significantly across Australia's property markets, with entry points ranging from under $400,000 to over $2 million depending on location and property type.

Deposit requirements typically range from 10-20% of the purchase price, with first-time buyers often able to access 10% deposit loans while investors generally need 20% minimum. Additional costs including stamp duty, legal fees, building inspections, and loan establishment fees typically add 5-8% to the purchase price.

Regional markets offer lower entry points, with quality properties available from $300,000-$600,000 in many areas, though buyers should carefully assess rental demand and growth prospects. Mining towns and agricultural centers can offer even lower entry points but come with higher volatility risks.

For investors, sufficient cash flow to cover holding costs during vacancy periods and potential interest rate increases is essential. Generally, buyers should have 6-12 months of additional expenses beyond the deposit and purchase costs.

What's the average time on market and vacancy rate in key areas?

Market conditions vary significantly across Australia's capitals, with some cities showing signs of softening while others maintain tight conditions.

Time on market has increased in Melbourne, with median days on market rising to 51 in early 2025, up from 42 a year earlier, indicating some cooling in buyer demand. However, this still represents relatively quick sales compared to historical norms and suggests a more balanced market rather than a buyer's market.

Perth has seen increased listings giving buyers more choice, but properties still sell relatively quickly compared to historical averages. The increased supply provides more negotiating power for buyers while maintaining reasonable selling timeframes for vendors.

Sydney and Brisbane continue to see relatively quick sales, particularly for well-priced properties in desirable locations. Quality properties in these markets often receive multiple offers and sell within 30-45 days.

Vacancy rates remain extremely low across all major capitals, often below 1%, which supports strong rental growth and positive investor returns. This tight rental market means well-located investment properties are likely to achieve consistent rental income with minimal vacancy periods.

For resale potential, the combination of tight supply, low vacancy rates, and continued population growth means well-located properties are likely to resell quickly, especially in Brisbane and Perth where market conditions remain particularly strong.

How are macroeconomic factors expected to affect the market ahead?

Several key macroeconomic factors will continue shaping Australia's property market through 2025 and beyond, with most trends supporting continued price growth.

Immigration remains a primary driver, with net overseas migration staying high and the government projecting continued strong population growth through 2030. This demographic pressure particularly impacts Sydney, Melbourne, and Brisbane where most new arrivals initially settle, maintaining housing demand well above supply.

Wage growth is improving but not keeping pace with house price increases in most capitals, creating ongoing affordability pressures that favor apartments and townhouses over detached houses. However, wages are rising faster in Perth and Brisbane, supporting local property markets.

Construction costs remain elevated due to labor shortages and supply chain issues, which limits new housing supply and supports price growth for existing properties. The skilled trades shortage is expected to persist for several years, maintaining upward pressure on building costs.

Interest rate policy will be crucial, with expected cuts providing stimulus to buyer activity and borrowing capacity. Lower rates typically support property price growth by improving affordability and encouraging investment activity.

Global economic conditions affect Australia through commodity prices, international investment flows, and currency movements. Strong commodity prices benefit mining states like Western Australia and Queensland, supporting their property markets through employment and income growth.

Conclusion

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.

Sources

1. Search Property - 2025 Property Boom Potential
2. KPMG - House and Unit Prices to Rise in 2025
3. Australian Property Professionals - Market Forecast 2025
4. API Magazine - State Property Market Expectations 2025
5. RealEstate.com.au - Melbourne Price Surge 2025
6. Brisbane Home Loan - Market Analysis 2025-2026
7. Here Property - Perth Market Predictions 2025
8. Property Update - Australian Market Predictions
9. Domain - House Price Report March 2025
10. Future Rent - 2025 Property Outlook