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Sluggish demand and rising supply may lead to “a small dip” in prices in the first part of the year, according to new research.
Property prices are set to slow – if not fall – in 2025, according to new reports from property data and analytics company, CoreLogic, and REA Group’s property data insights arm, PropTrack.
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In its annual Best of the Best Report, CoreLogic has said that the drag on buyer demand, exhibited towards the end of 2024 may continue, which could then cause a small decline in home values in the early part of the new year.
According to CoreLogic, waning demand, rising levels of advertised supply, and a changed outlook for inflation and interest rates have all cooled demand.
For example, it flagged that in the three months to November 2024, CoreLogic recorded 139,000 new listings nationally, the highest level for this time period since 2018, while the monthly change in the CoreLogic Home Value Index has slowed to just 0.1 per cent in November 2024.
Clearance rates also fell to below long-term averages in the final weeks of the year, with properties taking longer to sell.
However, a change in the cash rate could then “mark an inflection point”, increasing demand in the second half of the year.
CoreLogic said that “most expectations are for a ‘shallow’ rate-cutting path”, with forecasts across the big four banks placing the cash rate between 3.1 per cent and 3.6 per cent by the end of 2025, which would reinvigorate demand.
There is also some uncertainty as to how much a reduction in interest rates would increase buyer demand given affordability constraints are still so high, CoreLogic added in its report.
Eliza Owen, CoreLogic’s head of research, said: “Wages growth, while slowing, is well above the pre-Covid, decade average, at 3.5 per cent in the year to September.
“Real household income has been boosted by the Stage 3 tax cuts, despite this boost to income seemingly being saved by households for now. Real household income growth is expected to pick up further as inflation continues to ease in 2025.”
New housing construction remains subdued across the country and this is expected to continue into 2025, CoreLogic said, which may “help to keep a floor under home values”.
In a separate report by REA Group’s data business, PropTrack, the firm said it also expects price growth to ease in 2025.
Home prices are set to rise by up to 4 per cent in 2025, according to the PropTrack Property Market Outlook report, indicating a slowing in growth from 2024 (when it said prices increased 5.5 per cent over the year to November).
“With price growth moderating, stock levels rising, and the expected timing for interest rate cuts delayed, we anticipate weaker price growth compared to recent years,” said REA director of economic research and report author, Cameron Kusher.
Regional differences to remain
CoreLogic’s research estimated that an affordable dwelling purchase for the median income household in Australia under the current average owner-occupier rate (6.27 per cent) would be around $507,000. That’s far below the current median of $813,000.
For this reason, CoreLogic predicted that 2025 might be another year marked by low-deposit buyers, such as first home buyers, dropping out of the market.
Meanwhile, relatively affordable market segments, like the unit sector, may outperform over the course of the year, according to CoreLogic.
Regionally, property in markets like Melbourne and Hobart may see a subtle rise in value off the back of increased affordability, while the demand shock that has created strong price growth in the likes of Perth and Adelaide may start to ease, according to CoreLogic.
Should weak housing trends emerge at the start of 2025, most households should be “well-placed” to hold their property off the market until selling conditions improve, it said.
New housing construction also remains subdued across the country, which is expected to continue into 2025, CoreLogic said, and may help keep a floor under home values.
Much like CoreLogic, PropTrack said it expects significant regional variation in house price changes.
Adelaide and Perth are anticipated to lead price growth, PropTrack forecast, while Melbourne could experience a price decline of as much as 1 per cent.
Following a 12.6 per cent rise in Brisbane and 4.6 per cent increase in Sydney home prices over the year to November 2024, PropTrack expects home prices to grow more moderately in 2025, with Brisbane projected to increase by 2–5 per cent and Sydney by 1–4 per cent.
[Related: Perth suburbs dominate house price growth rankings]
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