Where property prices may drop in 2025,
Property prices in Sydney and Melbourne are forecasted to drop by up to 5 percent in the upcoming year.
However, Australia-wide home prices are expected to experience a moderate rise, according to recent predictions.
The average capital-city property price across Australia is anticipated to increase by 1 to 4 percent.
This forecast is outlined in SQM Research’s Housing Boom and Bust Report for 2025, which was published on Monday.
Housing Boom & Bust Report 2025
| City | Forecast |
|---|---|
| Perth | 14% to 19% |
| Brisbane | 9% to 14% |
| Darwin | 5% to 8% |
| Melbourne | -5% to -1% |
| Sydney | -5% to -1% |
| Adelaide | 8% to 13% |
| Hobart | -3% to 2% |
| Canberra | -6% to -2% |
| Capital city weighted average | 1% to 4% |
The increase in property prices would mainly be driven by smaller capitals, while Sydney and Melbourne are predicted to decline.
Both cities are expected to fall by 1 to 5 percent over the next year, according to forecasts.
It is assumed that the Reserve Bank will cut the cash rate by 0.25 to 0.5 percentage points.
This rate cut is expected to occur by the middle of the year, which could affect property trends.
SQM Research founder Louis Christopher explained that the rise in average capital city prices would come from smaller capitals.
He noted that property markets in Perth, Brisbane, and Adelaide would drive these gains, despite declines in Sydney and Melbourne.
Christopher believes that house prices in Sydney and Melbourne are already falling and will continue to do so.
This is expected to persist until the anticipated rate cut takes effect, potentially stabilizing the market.
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Christopher predicted that Sydney and Melbourne would see an overall decline, even if prices rise after a rate cut.
He explained that accumulating listings, distressed sales, and an unaffordable market would continue to weigh on property prices.
“There may be a lag of two to three months before any noticeable changes,” Christopher added.
Most likely, by this time next year, rising prices will be seen in Sydney and Melbourne.
However, these increases won’t completely offset the declines expected early in the year, he noted.
Christopher stated that years of high interest rates were pushing homeowners and investors to sell, which would lower prices.
“We are closely monitoring the rise in distressed listings,” he said.
This increase in distressed listings is one of the key factors driving the market’s downward pressure.
Christopher predicted that Perth would outperform the rest of the country, with home prices expected to rise by 14 to 19 percent.
Brisbane would follow closely behind, with price increases forecast to range from 9 to 14 percent.
Adelaide would also experience significant growth, with home prices projected to rise between 8 and 13 percent.
AMP deputy chief economist Diana Mousina suggested that dwelling prices might grow slightly more than SQM’s prediction for 2025.
“Our forecast is for a 5 percent increase next year, though I agree with the divergence between cities,” she noted.
Mousina did not expect Sydney house prices to fall across the year.
“It’s difficult to see Sydney prices dropping overall,” she said. “However, small price declines in Melbourne are reasonable.”
She also mentioned that Sydney still faces an undersupply situation, which could support price stability.
CBA chief economist Gareth Aird agreed with Mousina’s prediction of 5 percent national growth, assuming a 1 percent rate cut.
He acknowledged that unaffordable house prices would weigh on both Sydney and Melbourne, though Sydney’s growth would likely surpass Melbourne’s.
“Sydney is the least affordable market in Australia compared to other capital cities,” Aird explained. “It stands out significantly.”
Aird also noted that there is only so much house prices can outpace wage growth, especially with high interest rates.
Christopher explained that strong price growth in Perth, Brisbane, and Adelaide would continue due to population growth outpacing housing supply.
Perth, in particular, was expected to outperform the rest of the country, he emphasized.
“When we look at leading indicators for Perth, there are no signs of trouble brewing,” Christopher said.
He further explained that if a correction was to occur in Perth, it would likely start in mining towns.
Mousina agreed with Christopher’s assessment, saying, “Perth will be the standout. Economic trends suggest it’s coming out on top.”
Christopher also pointed out that changes, or a lack of changes, to the cash rate could influence house prices in 2025.
“Our second-most likely scenario is no rate cut, as recent language from the RBA suggests this could happen,” he said.
In this scenario, SQM predicted that dwelling prices might grow by up to 1 percent nationally or fall by 3 percent.
Prices could drop as much as 7 percent in Melbourne and 8 percent in Sydney, but rise by up to 11 percent in Perth.
