The Big Picture - How Property Stacks Up
Let's start with some fascinating numbers about Australian property. Despite a more modest 2024, residential real estate remains the cornerstone of Australia's wealth, valued at an impressive $11.1 trillion. To put that in perspective, it's worth more than our superannuation funds ($4.1 trillion) and the entire Australian stock exchange ($3.3 trillion) combined!
Residential Real Estate Underpins Australia’s Wealth
While the share market had a stellar 2024 (up 11.4% including dividends, compared to property's 8.3% total return), the longer-term story tells a different tale. As CoreLogic Economist Kaytlin Ezzy points out, property has outperformed equities in six of the past ten years, delivering total returns of 132.6% compared to the share market's 126.4%. It's a reminder that when it comes to investing, playing the long game often wins - or as Ezzy puts it, "time in the market has beat timing the market."
2024 Market Review – A 30-Second Recap... Last year was fascinating for property, with some markets booming while others took a breather. Here's how things played out:
Capital Cities (2024)
- Perth led the pack with an impressive 19.1% growth
- Adelaide followed strong with 13.1% growth
- Brisbane showed solid gains at 11.2%
- Sydney managed a modest 2.3% rise
- Melbourne, Canberra, and Hobart saw slight declines
Our Regions (2024)
- Western Australia dominated with 16.1% growth
- South Australia stayed strong at 12.5%
- Queensland performed well at 10.5%
- NSW and Tasmania achieved 3-3.5% gains
- Victoria experienced a small decline
The Shifting Market Here's something interesting - December 2024 marked our first national median value decline (0.1%) after 22 straight months of growth. While this might sound concerning, it's actually created some excellent buying opportunities. We're seeing:
- Property listings up 5% compared to 2023
- Average selling time extending from 28 to 33 days
- More properties coming to market
- Buyers gaining more negotiating power
What's Coming in 2025? Domain forecasts capital city values to rise by 5-7%, with five major capitals expected to hit a median house price of over $1M - that's Sydney, Melbourne, Canberra, Brisbane and Adelaide.
The Big Banks' Views Our major banks are all predicting growth, though they differ on exactly how much:
- ANZ: 5-6% rise
- CBA: 5% rise
- NAB: 4.2% rise
- Westpac: 3% rise
City-by-City 2025 Outlook
Perth - Our Star Performer
- Looking at 14-19% growth (SQM Research)
- Coming off an already strong 18.7% in 2024
- Expected to reach a median price of $984,000 (Domain)
- Showing particularly strong rental market conditions
Adelaide - Maintaining Momentum
- Built on 14.6% growth in 2024
- Forecasted for 8-13% growth in 2025
- Worth watching supply levels which could impact growth
Brisbane - Steady and Strong
- Predictions range from 9-14% (SQM Research)
- More conservative estimates at 2-5% (REA Group)
- Continued benefits from Sydney migration
- Keeping an eye on affordability limits
Sydney and Melbourne - Interesting Times
- Sydney's median house price heading toward $1.75M
- Melbourne’s median house price hovering just above $1M
- Largest price gap in 20 years (60% difference)
- Melbourne showing lowest 5-year growth (20.6%) among major cities
- Auction clearance rates around 60% in 2024
- Possible 5% price adjustment before rate cuts kick in
Interest Rates - What's Likely to Change? The interest rate story is particularly interesting for 2025:
- We're currently sitting at a cash rate of 4.35%
- Domain's predicting this will drop to 3.6%
- This could bring home loan rates down to the 5-5.5% range
- CBA and ANZ are tipping the first cut for February 2025
- NAB and Westpac are a bit more conservative, suggesting May 2025
- Worth noting we're about six months behind international markets in the rate-cutting cycle
Market Trends We're Watching There's quite a bit happening with buyer behaviour and market dynamics:
- First-home buyers have increased by 25% since 2019
- We saw an 8% jump in first-home buyers just in the last 12 months
- Spring 2024 listings were 10% above average
- Population growth continues to drive demand
- Building costs are staying high, which is limiting new supply
- Construction is still facing labour shortages and planning delays
Rental Market Outlook The rental market is shaping up to be quite competitive in 2025:
- Vacancy rates remain particularly low
- Metropolitan areas are likely to see continued rent increases
- Western Australia's vacancy rates are exceptionally low
- Brisbane and Adelaide are showing strong rental yields
- Investor opportunities look particularly attractive in growth regions
The Mortgage Broker Trend With lending criteria becoming increasingly complex, it's no surprise that 8 out of 10 property investors now partner with mortgage brokers. This shift reflects the challenge of navigating varying lender policies, changing interest rates, and different borrowing requirements. At Futurerent, we've partnered with Australia's leading mortgage brokers to help our clients secure competitive rates and optimise their borrowing capacity, particularly as we prepare for potential rate changes in 2025.
What This Means For You If you'd like to understand how these market conditions could impact your investment plans, or if you have specific questions about certain markets or trends, please feel free to reach out.
