Following a year marked by high interest rates and varied market performances, 2025 holds new prospects for the Australian property market, according to InvestorKit.
Investors and home buyers alike are keen to understand the trends that will drive the market in the coming year.
With affordability continuing to dictate market dynamics, regions like Western Australia, South Australia, and Queensland are expected to remain investor favorites due to their relative affordability and investment potential.
Affordable markets have shown remarkable performance over the last few years, consistently outpacing their more expensive counterparts, InvestorKit reported.
Looking ahead, these markets are predicted to continue their dominance.
Factors such as the slow materialisation of rate cuts, which are forecasted to reduce RBA cash rate by only 0.5% to 1% in 2025, will keep borrowing costs relatively high, making affordable markets more attractive.
While rental growth is slowing in many areas, certain markets like Greater Adelaide and the ACT are experiencing an uptick in rental rates compared to the previous year.
However, the general trend across the country is a deceleration in rental growth, tied closely to lagging wage increases.
Despite this slowdown, vacancy rates remain critically low, driven by factors such as rapid population growth, reduced household sizes, and limited new housing supplies.
This sustained low vacancy scenario is likely to push more demand towards purchasing homes, potentially boosting sales market prices.
In 2024, rental yield improvements were notable in certain regions, prompting a shift in investor interest from rentals to property sales, InvestorKit reported.
As rental yields become more attractive, particularly in areas offering moderate returns, investor activity is expected to heighten.
This trend is particularly strong in regions where house prices range between $600,000 and $1.1m, such as NSW’s coastal regions and parts of Melbourne, Brisbane, and the Gold Coast.
The ongoing trend of migration from capital cities to regional areas continues to reshape the housing demand landscape. This movement is driven by the comparatively lower cost of living and better job opportunities in smaller capitals and regional areas.
Sydney and Melbourne are the main sources of this regional migration, with job opportunities in these smaller areas significantly outpacing those in the larger cities.
2025 is set to witness continued growth in more affordable submarkets, complemented by a potential increase in the trend of upsizing, as homeowners leverage their capital gains.
This shift is expected to bring more activity to higher-priced markets and support a broader recovery across the property spectrum.
Visit the Investorkit website for more insights.
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