After an extended run of rising home values nationally, it’s time to reflect on whether property values will keep climbing, or if the market is due to take a breather. 

For anyone thinking of buying a first home, upgrading to their next property, or for investors looking at adding a rental property to their portfolio, the trajectory of property values is a critical issue.

No one can say for sure how property prices will move, especially over the short term. Interest rates can be a key driver of housing markets, and rate movements fall firmly in the lap of the Reserve Bank. 

Nonetheless, Domain’s Forecast Report Financial Year 2025[1] suggests Australian home prices are set to rise over the 2025 financial year. 

Although the pace of house price growth is largely anticipated to be slower compared to the 2023 calendar year and the 2024 financial year, Domain is predicting price growth will accelerate (albeit marginally), particularly for units in some markets. Let’s take a closer look.

Affordability and loan serviceability will shape price growth 

It is no secret that Australians are facing the twin challenges of poor housing affordability and tight serviceability limits amid a cost-of-living crisis and high interest rates.

A key factor driving home values higher is low supply. It takes time to construct new homes, and Domain says “constrained supply is expected to be the predominant factor influencing property prices in the short term”.  

Tight supply is expected to drive price increases across most cities during the current financial year due to the scarcity of land, low levels of building approvals and high construction costs. 

At the same time, a growing population supported by strong migration continues to underpin high housing demand.

Long story short, we are seeing the ‘perfect storm’ of low supply plus high demand push property values higher.

Of course, Australia is made up of multiple housing markets, each shaped by a variety of local factors. Here’s how Domain expects various markets to behave.

House price forecasts

According to Domain, the smaller cities of  Perth, Adelaide and Brisbane – as well as the nation’s most expensive property market, Sydney, are expected to lead house price gains to reach new records.

 By the end of 2025, median house prices could pass the $1.7 million mark in Sydney, with Perth ($800,000) and Brisbane (almost $1 million) also expected to see big jumps in value.

Domain is also predicting that by the end of 2025 calendar year, Adelaide will have cracked the $1 million benchmark for median house prices.

Across regional markets, the Sunshine Coast and Queensland’s Gold Coast house prices are expected to reach record highs.

In Melbourne, demographic shifts are forecast to keep house prices stable. And in the ACT, Canberra house prices are expected to remain in recovery mode throughout FY25.

Unit price forecasts

As with houses, apartments in Sydney, Brisbane and Adelaide are expected to lead price gains. 

Domain also expects unit values in Perth, the Gold Coast, Sunshine Coast and regional Australia to reach record highs.

Interestingly, Melbourne and Canberra are the only cities where unit price growth is expected to be higher than houses.

House and unit price forecast to the end of FY25

* Forecast percentage change in house and unit prices by the end of FY25. (Source: Domain) 

What it means for home buyers – and sellers

We have looked at predictions made by Domain. It is always important to realise that any forecasts are made on the basis of the data available. In a rapidly moving market, a lot can change.

That said, home buyers and investors may want to look at ways of fast-tracking their buying plans to buy sooner rather than later, and avoid paying more for a property further down the track.

Frankly, the same applies to sellers. Yes, you may be able to sell your home for more by holding off for several months, but the flipside is that you could also pay a lot more for your next home.     

The best step at this point is to speak with your local Raine & Horne property expert. He or she is well-placed to give you a clear explanation of the state of the local market, and the buying/strategy that can work best for you.  

To find out more about the housing and apartment markets in your suburb, town or region, talk to your local Raine & Horne agent.