Expert predicts drivers of next year's house price movement
Home prices will continue to rise across Australia next year, though house price growth will slow compared to 2023 and 2424, according to property marketplace Domain.
Domain’s FY25 Price Forecast Report, which predicted changes in house and unit prices across capital cities and regional areas for 2025, indicated the possibility of a slight acceleration of unit prices in some markets.
Perth, Adelaide, Sydney, and Brisbane are projected to lead house price gains, potentially setting new records. The Sunshine Coast, Gold Coast, and regional Australian house prices are also anticipated to reach record highs.
By the end of next year, Sydney’s house prices could exceed $1.7 million, with Perth’s reaching $800,000. Brisbane and Adelaide are also expected to join the million-dollar club.
Sydney, Brisbane, and Adelaide are expected to lead price gains for units, with prices in these cities, along with Perth, Gold Coast, Sunshine Coast, and regional areas, reaching new highs. Melbourne and Canberra might see unit price growth outpacing that of houses, with Melbourne and Canberra experiencing slightly accelerated unit price growth.
Nicola Powell (pictured above), Domain’s chief of research and economics, identified population growth, construction challenges, and borrowing power as key drivers behind the price increases.
“Demand has risen as housing composition changes, demographic shifts, and robust population growth,” Powell said. “We have seen an increase in single-person households and a decrease in household size in general (fewer people, on average, living in each household), both amplifying housing demand, further compounded by migration.
“Home building has also struggled to keep up with population growth due to the scarcity of land, weak building approvals, and high construction costs, exacerbating the existing structural undersupply. This will lead to an ongoing limited supply of new homes on the market.”
Powell added that stage 3 tax cuts effective from July 1 are expected to boost borrowing capacity, increasing buying power and potentially driving up home prices further.
“While the continued increase in property values is good news for Australians that own a home, we have to acknowledge that it’s becoming increasingly harder for many Australians trying to get into the property market,” she said.
“We urgently need more supply to balance the market and make it more affordable for Australians to own a home. The government has made it clear that housing is a priority focus, but now we need to start seeing all levels of government and industry working together towards a solution.
“In the year ahead, it would be good to see an acceleration in development approvals and initiatives such as incentives for construction – particularly for developers to build affordable housing where people want to live and with the infrastructure to support them. We should also be looking for better ways to utilise existing housing stock and ensure greater housing density in the right locations.”
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