The property market is set for another dynamic year in 2025, with key economic factors shaping its trajectory. According to Mortgage Choice, seven major influences will determine market conditions throughout the year.
While no predictions are set in stone, these potential influences provide insights into market dynamics:
- Inflation: High underlying inflation continues to push up household costs, which may keep interest rates elevated.
- Interest Rates: While many expected cuts in late 2024, they did not occur. Some predict three cuts in 2025, starting in April.
- Labour Market: The job market remains strong, with low unemployment at 3.9%. For inflation to ease, unemployment may need to rise to 4.5%, but there are no signs of this happening soon.
- Population Growth & Migration: Although population growth has slowed slightly, it remains well above the long-term average of 1.4%, sustaining high demand for housing.
- Mortgage Lending: Lending activity continues to rise, increasing housing demand and pushing prices higher.
- Construction Costs: Material costs have risen 34.3% since the pandemic. While growth has slowed, prices remain high, adding to housing costs.
- Supply: The Federal Government aims to build 1.2 million new homes by 2029, but dwelling approvals remain far below what’s needed to meet this target.