Australian Housing Market In 2025
QBE’s 2022-2025 Australian Housing Outlook report predicts volatility in Australia’s property market over the next three years.
Rising interest rates are expected to lead to a correction phase, with Sydney forecast to see the sharpest downturn. Perth may benefit from mining sector strength. The rental market will face pressure from returning migration. Unit prices are seen as more resilient than houses.
As investors, it is crucial to have foresight and knowledge of future market trends. This article will provide a breakdown of the Australian property market’s future forecasts based on QBE’s report.
Australian Housing Market Goes Green
- Australia has around 3.2 million rooftop solar installations, which amounts to approximately 30% of all homes – the world’s highest proportion of households with uptake of solar energy. A 5kW rooftop solar system can save the average Australian household $909 per year on electricity.
- Value is added to properties that are sustainable and resilient, research suggests.
- Energy efficient homes are valued higher by 5-10% than non-energy efficient ones, even after factoring in property-specific items.
- Proper insulation of ceilings, walls, and floors of a typical home can save 45-55% on heating and cooling costs with a payback period of 5-6 years.
- LED lighting and increased insulation are the most commonly installed energy saving initiatives.
- Green home loan offerings allow households to access discounted interest rates if they meet certain energy ratings.
- The minimum 7-star Nationwide House Energy Rating Scheme (NatHERS) rating for all new homes has accelerated the transition to green housing.
- An Australia-wide mandatory energy rating system for residential property can further incentivise the adoption of green housing.
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Key QBE Forecasts for the Australian Property Market for the Next Three Years
Here are some of key events that may occur in the Australian market over the next three years, according to QBE’s 2022-25 Australian Housing Outlook:
- The sharp increase in the national median dwelling price since the onset of the pandemic has come to an end. Quarterly growth turned negative in June 2022 and the Australian housing market has now entered a phase of correction.
- Rapidly rising interest rates to limit inflation are seen as the primary driver of falling prices.
- Overseas migration return will increase rents in the CBD, attracting investors looking for rental yield growth.
- Prices are expected to recover beyond mid-2023 as interest rate rises are expected to stabilise.
- Sydney and Melbourne housing markets will decline due to high debt and rising rates.
- Brisbane, Perth, Adelaide to benefit from migration, affordability and economic factors.
- Rental yields are set to rise, attracting investors to the market.
- New minimum energy efficiency standards to improve sustainability of new builds.
- A strong resource sector and population growth will boost Perth’s housing market.
- Unit prices are forecast to decline less than houses, given less exposure to affordability issues with the price growth in detached houses over the last two years outstripping units.
- The rise of working from home boosted demand for larger dwellings, however, this is beginning to slow as workers move to hybrid working arrangements.
Download the QBE’s 2022-25 Housing Market Outlook report here for a complete analysis.
QBE Predicts Future Trends in Capital Cities
QBE’s report predicts the Australian property market with mixed forecasts across its major capital cities. Sydney and Melbourne are expected to see a decline in their median house prices, while Brisbane, Perth, and Adelaide are set to continue their growth.
Sydney Property Market Forecast: Debt Burdened, Rising Interest Rates and Tighter Lending Threats
Sydney House Market
- Sydney’s recent house price boom has ended. Prices had fallen in April 2022, declining 18% from the peak. The median house price in Sydney was $1,531,000 in June 2022 and is expected to fall to $1.2 million in June 2025.
- Sydney’s high level of household indebtedness makes it susceptible to rising interest rates and tighter lending conditions.
- Soft growth is expected to return in late 2023, supported by stamp duty reform, and the median house price is expected to reach $1,405,000 in the June 2025 quarter.
- Houses have outperformed units, but the relative price between them is likely to attract buyers back to apartments in the next three years.
Sydney Unit Market
- Unit rents are expected to increase by 15% in 2022/23, and investor demand will be supported by strong rental growth.
- Unit rents are now nearing the 2018 high, with growth expected to swing back to units from June 2022, resulting in a forecasted 15% increase in 2022/23.
- Sydney’s median unit price is expected to soften in the short-term before rebounding to $830,000 by 2025.
Regional New South Wales Centres
- Regional New South Wales is experiencing a shift in population growth due to the pandemic, with preferences towards space, working from home, and affordability advantages.
- This shift is expected to only partially unwind, resulting in a more even distribution of population growth out to 2024/25.
- Housing demand in locations such as Newcastle and Wollongong is expected to benefit from this trend.
Melbourne Property Market Forecast: Oversupply, Falling Prices, Slumping Unit Market
Melbourne House Market
- In the June quarter 2022, house prices fell by 2.2% with the median price at $1,060,000. The median house price is forecasted to fall 11% from 2021 to $950,000 in June 2025.
- Diminished housing demand has led to an oversupply of dwelling stock in 2021/22, easing pressure on the residential sector.
- New housing demand is expected to be negatively affected over the next three years due to rising interest rates, high household indebtedness, elevated construction cost growth, and increasing oversupply.
- Melbourne’s median house price is predicted to plummet in 2023, but will recover by June 2025 resulting in an expected median price of $950,000. This may give an opportunity for Canberra to surpass Melbourne as the second most expensive city in Australia.
Melbourne Unit Market
- Approximately 60% of units in Greater Melbourne are rented and are the build form targeted more by investors.
- Unit rents are expected to fully recover from pandemic losses by December 2022, and recent interest rate rises may have a further impact on prices over 2022/23.
- The reopening of international borders is restoring rental demand, particularly in Inner Melbourne where rental vacancy rates are tightening. Driven by the return of international students and overseas migration, population growth is set to bounce back to 1.5% by 2022/23
- Aided by the State Government’s ‘Big Housing Build’ and build-to-rent investment, investor demand is forecast to return to growth in early 2024, with a rise in attached dwelling construction.
- Units are declining but should rebound as rents recover. The median unit price in Melbourne is set to return to around $630,000 by June 2025 after reaching a trough in late 2023.
Regional Victoria Centres
Work-from-home trends have shifted intrastate migration patterns towards regional locations such as Geelong, Bendigo, and Ballarat, which are expected to bring in population growth on par with capital cities.
Brisbane Property Market Forecast: Strong Migration & Support from Recovering Tourism
Brisbane House Market
- The Brisbane housing market was the strongest performer in 2021, with a 32% increase in the median house price over the year, compared to 22% nationally.
- Due to an influx of interstate migrants from southern states over the past two years, pressure on the dwelling stock has risen, leading to a strong dwelling stock deficiency.
- The strong population growth, affordability, and dwelling stock balance will help Brisbane to outperform most other cities in the short run.However, Brisbane’s affordability advantage to Sydney and Melbourne has shrunk in the last 12 months. It is expected to stabilise over the coming three years to 2023/25.
- The median house price in Brisbane lifted 25% to $864,000 in June 2022.
- Affordability and prices are expected to be crimped due to tightening credit conditions and lower borrowing capacities.
- The median house price is forecasted to sit at approximately $810,000 by June 2025.
Brisbane Unit Market
- Brisbane unit prices rose by 13% in 2021/22 compared to the national average of 3%.
- Median unit price in Brisbane was $505,000 in June 2022.
- High demand from investors due to strong rent rises.
- Rental vacancy rate in Brisbane was at 0.97%, the lowest since March 1988. This is due to changes to household formations and migrating young families.
- Proposed land tax changes have been shelved, removing a potential downside risk to the outlook for unit prices.
- The 2032 Olympics and associated infrastructure is expected to boost developer and buyer optimism, leading to strong construction growth in the high-density sector
- Units supported by a tight rental market. Median unit price is forecast to hold at $500,000.
Perth Property Market Forecast: Strong Rebound & Student Migration Increase
Perth House Market
- The median Perth house price is estimated to have grown 10% in 2021/22 to $665,000 in June 2022.
- The reopening of domestic and international borders, greater housing affordability, a strong mining sector, a strong jobs market and limited availability of stock bolstered Perth’s property market recovery.
- With a house price rise of 4% in 2024/25, the median house price is expected to reach $670,000 in June 2025.
Perth Unit Market
- The rental demand and growth in the unit market is being driven by the temporary population in the mining sector.
- Perth is expected to see an increase in student migration.
- Having risen 3% to $436,000 in 2021/22, the Perth unit market is expected to avoid a national downwards trend in dwelling prices for the next year or so.
- The completion of new Metro net links and social infrastructure in the Perth CBD is expected to bring strong trend growth for infill development.
- The median unit price is forecast to reach $459,000 in June 2025.
Adelaide Property Market Forecast: Market Price Growing; Might Suffer in the Coming Years
Adelaide House Market
- Over the last two years, uncharacteristic migration inflows, low supply, and relative affordability thrusted Adelaide’s house market price growth.
- In June 2022, Adelaide’s median house price grew 42% higher than in June 2020, from $700,000 jumping to $718,000.
- Adelaide’s housing market growth is expected run for the next three years. However, it will ultimately suffer due to lower borrowing capacities which are expected to continue to drag on prices. Net interstate migration demand boost is also expected to vanish.
- Median house price in Adelaide is expected to diminish 6% over the next three years, to $676,000 by June 2025.
Adelaide Unit Market
- Adelaide’s unit price grew with 11% recorded over 2021/22, and its median unit price reaching $462,000 in June 2022.
- In 2021/22, rent also increased by 9% for units. It is further expected to rise by 17% by June 2025.
- The median unit price is forecasted to be $468,000 in June 2025.
Hobart Property Market: Expected to be 3rd Most Unaffordable Market in Australia
Hobart House Market
- Hobart is expected to become the third most unaffordable market in Australia, with median house price rising to 19%.
- A sharp rise in property listings hindered growth, with prices expected to have peaked at $811,000 in the June quarter of 2022.
- Due to persistent undersupply of dwellings, property prices won’t fall to the same magnitude as Sydney and Melbourne throughout the next 18 months.
- The median house price is predicted to decline by 8% in 2022/23, with modest growth lifting the median to $750,000 in June 2025.
Hobart Unit Market
- Hobart’s median unit price rose 11% to $651,000 in June 2022 due to strong gains in rental prices, which reflect the tight rental vacancy conditions.
- Unit prices are expected to rollercoast down to $610,000 in late 2023 and back up to $636,000 in June 2025.
Canberra Property Market Forecast: Became the 3rd Most Expensive Capital City in Australia
Canberra House Market
- Canberra became the 3rd most expensive capital city in Australia, with median house price surpassing $1M in March 2022. Despite that, its average household income remains one of the lowest than elsewhere in Australia. However, rising interest rates will increase borrowing costs.
- The median house price increased by 14% to $1,019,000 in June 2022.
- In the next 18 months, a 9% fall in the median house price is expected with median house price predicted to rise to $996,000 by June 2025.
Canberra Unit Market
- Unit prices saw consistent growth of 6% over the year, with supporting factors like high incomes, tight dwelling stock, and falling listings. Unit median price reached $606,000 in June 2022.
- Due to affordability factors, Median unit price is expected to rise to around $627,000 by June 2025.
Darwin Property Market Forecast: Expected Growth in Rental Yields
Darwin House Market
- Darwin Median house price grew 5% in 2021/22, reaching $627,000 in June 2022. It remains the most affordable capital city.
- House prices are predicted to fall in the coming year; better than elsewhere in the country.
- The median house price is forecasted to grow to $647,000 in June 2025.
Darwin Unit Market
- Investors are expected to be drawn to the high gross unit rental yields of around 6%.
- Darwin’s unit prices are expected to outgrow house price growth by mid-2025 with the median unit price increase of $412,000 expected in June 2025.
- The NT Infrastructure Strategy 2022 to 2030 will increase construction works and conversely, greater job opportunities.
So What Does QBE’s 2022-25 Forecast Mean for Aussie Expats Living Overseas?
Expats planning to invest in Australia are getting a forecast map to help devise their investment strategy based on QBE’s 2022-25 property market report.
By understanding the future trends and fluctuations in the housing market, expats can make informed investment decisions and potentially benefit from the predicted growth in certain cities, such as Perth, Brisbane, and Adelaide.
Additionally, the report highlights the importance of sustainable and energy-efficient homes, which could be an attractive option for expats who are environmentally conscious and interested in purchasing properties that add value over time. We can also see that the outlook is more positive for units than houses over the next three years.
Expats who are looking to capitalise on rental income may also benefit from the predicted increase in rental prices in certain areas, such as CBDs, due to the return of overseas migration, as well as an increase in investor demand from rising rental yields.
Plan Your Future Investment Strategy with Odin Mortgage
From an investor angle, the property market in 2025 may present both opportunities and risks. While strong demand and rising prices could offer attractive returns for those who are able to enter the market, investors will need to carefully evaluate their strategies and be prepared to navigate changing market conditions.
Additionally, with a growing emphasis on sustainability and resilience, investors who focus on green properties and energy-efficient buildings may be well-positioned to take advantage of shifting consumer preferences and potentially benefit from higher property valuations in the long term.
Odin Mortgage can help you strategise your investment goals. Contact us today for our expert assistance.
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Frequently Asked Questions
Can Aussie expats living in Singapore buy property in Australia?
Yes, Australian expats living in Singapore can buy property in Australia. There are no restrictions on foreign ownership of property in Australia, as long as you are an Australian citizen or permanent resident.
However, there are some things to keep in mind if you are an expat buying property in Australia:
- You will need to get a foreign resident loan from an Australian bank. These loans typically have higher interest rates than loans for Australian residents.
- You will need to pay foreign exchange fees when you transfer money from Singapore to Australia.
- You will need to pay stamp duty on the purchase of property in Australia. The amount of stamp duty you pay will depend on the value of the property.
- You will need to pay land tax on the property each year. The amount of land tax you pay will depend on the value of the property and the location of the property.
Despite these considerations, buying property in Australia can be a good investment for Aussie expats living in Singapore. By doing your research and planning carefully, you can increase your chances of making a successful investment.
How can Australian expats living in Hong Kong invest in property back home?
There are a few ways that Australian expats living in Hong Kong can invest in property back home.
- Direct investment: This is the most common way to invest in property. You would buy a property in Australia and become the legal owner of the property. This gives you the most control over the property, but it also comes with the most risk.
- Indirect investment: This is where you invest in a property investment trust (REIT) or a property syndicate. A REIT is a company that owns and manages a portfolio of properties. A property syndicate is a group of investors who pool their money together to buy a property. Indirect investment is less risky than direct investment, but it also gives you less control over the property.
- Managed investment scheme: This is a type of investment fund that invests in property. Managed investment schemes are professionally managed, which can reduce the risk for investors. However, they also charge fees, which can reduce your returns.
When choosing how to invest in property, it is important to consider your financial situation, your investment goals, and your risk tolerance. It is also important to do your research and understand the different options available to you.
Can Aussie expats living in the UAE buy Australian property from overseas?
Yes, Australian expats living in the UAE can buy Australian property from overseas. However, there are some restrictions and requirements that you need to be aware of.
- You will need to apply to the Foreign Investment Review Board (FIRB) for permission to buy property in certain areas, such as near sensitive infrastructure or in areas with high demand for housing.
- You will need to provide evidence of your financial capacity to repay the loan, such as bank statements and pay slips.
- You may need to have a guarantor for the loan, such as a family member or friend who is an Australian resident.
- You will need to get a foreign resident loan from an Australian bank. These loans typically have higher interest rates than loans for Australian residents.
- You will need to pay foreign exchange fees when you transfer money from the UAE to Australia.
- You will need to pay stamp duty on the purchase of property in Australia. The amount of stamp duty you pay will depend on the value of the property.
- You will need to pay land tax on the property each year. The amount of land tax you pay will depend on the value of the property and the location of the property.
If you are considering buying property in Australia, it is important to speak to a financial advisor or mortgage broker to get specific advice on your situation.
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