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Australia’s real estate market in 2025 is set to be shaped by demographic shifts, lifestyle changes, and rising interest rates, according to the McGrath Report 2025. The report highlights key trends across urban and coastal areas, emphasising the roles of affordability, sustainability, and the Baby Boomer generation.
John McGrath (pictured), CEO of McGrath Estate Agents, said that higher interest rates and limited housing supply are reshaping the market. Baby Boomers, who hold a significant portion of the country’s private wealth, are making key decisions about downsizing and investing, influencing property prices nationwide.
Australians are increasingly focusing on personal wellbeing in their homes, a shift driven by global instability and post-pandemic lifestyle changes. This trend has resulted in the adoption of smart home technologies such as energy-efficient lighting and air filtration systems. The use of natural and sustainable materials in home construction is also rising.
Adam Haddow, director of SJB, noted a growing preference for defined spaces over open-plan designs, offering greater privacy. As online shopping increases, homes are also incorporating more advanced security features.
Demand for coastal properties continues to grow, with more Australians seeking affordable homes outside city centres. Areas such as the Sunshine Coast and Central Coast are seeing increased interest, driven by remote work flexibility and lifestyle preferences. The report indicates rising property prices in these regions as buyers seek more affordable alternatives to urban living.
Urban Housing Affordability
Urban housing is evolving as governments and developers address affordability concerns. The report highlights an increase in townhouses and smaller apartment buildings, particularly in the middle-ring suburbs of Sydney, Melbourne, and Brisbane. Changes in planning regulations are expected to promote more diverse housing options for downsizers and younger families.
The Baby Boomer generation, which controls nearly 50% of Australia’s private wealth, is driving significant market activity. Many Boomers are downsizing or investing, creating opportunities for younger buyers to move into larger homes while increasing demand for smaller, low-maintenance properties. The report notes that many Boomers are tapping into superannuation benefits to release equity for retirement.
Sydney and Brisbane continue to see strong demand, with limited housing supply and major infrastructure projects like the Sydney Metro contributing to price increases. Despite higher interest rates, these cities are attracting buyers from various demographics. In contrast, Melbourne is experiencing slower growth due to recent tax reforms and a more balanced housing supply.
The report forecasts continued price growth in coastal and urban areas, driven by infrastructure developments, migration, and demographic changes.
What do you think of these trends? Will you be looking to buy or sell in 2025? Share your thoughts in the comments below.
