As the curtain falls on 2024, Australia’s property market remains a story of contrasts, challenges, and opportunities. At Sound Property, we’ve spent the year helping investors and homeowners navigate a complex and evolving landscape. Here’s our wrap-up of 2024 and an outlook for 2025, with our unique perspective on where the market might be heading. Stay tuned for our annual ‘Get Investor Ready in 2025’ Property Masterclass scheduled on 20th February 2025 at 12.30pm, where we will reveal our thoughts and focus for 2025.
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2024: A Year of Resilience and Regional Strength
Despite high interest rates and affordability challenges, the property market demonstrated remarkable resilience. Here are the key highlights:
- Sydney and Melbourne: Challenges with Opportunities
These two powerhouse markets began to show cracks, with affordability constraints, rising listings and cooling buyer enthusiasm. While there were pockets of growth in desirable suburbs, the overall trend leaned towards stagnation. However, this presents a countercyclical opportunity for savvy investors.
- Brisbane and Adelaide: Growth Markets with Strong Foundations
Brisbane and Adelaide emerged as the stars of 2024, driven by strong local economies, tight housing supply, and population growth. These markets consistently defied broader national trends and delivered capital gains for investors who got in early.
- Perth: Short-Term Strength, Long-Term Caution
Perth delivered strong growth this year, but Sound Property urges investors to tread carefully. Much of the growth has been fuelled by interstate investor demand, which can mask the market’s local fundamentals. History has shown Perth’s market to be volatile, with significant corrections occurring after investor-driven peaks. As seen post-2009, the recovery can take a decade. Investors must evaluate long-term fundamentals before entering this market.
- Interest Rate Jitters
The Reserve Bank of Australia’s decision to maintain high interest rates for much of the year kept borrowing costs elevated. This limited upward price momentum but also stabilised speculative activity in overheated segments.
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2025: A Year of Strategic Opportunity
Looking ahead, 2025 promises to be a year of recalibration. At Sound Property, we encourage our clients to take a long-term view, focusing on markets with strong economic fundamentals and growth potential rather than chasing short-term trends and fads. Our approach to 2025 is underpinned by three key principles: local insights, data-driven decisions, and long-term thinking.
What We Expect:
- Sydney and Melbourne: Time to be Selective
High borrowing costs and increased supply are expected to push prices down by up to 5% in these cities if interest rates are slow to drop. While this may sound alarming, it also presents a chance for buyers to enter markets counter-cyclically. Areas with infrastructure upgrades or proximity to employment hubs will likely hold their value better, making them prime targets for investors. For buyers, price corrections could open doors to high-quality properties in blue-chip suburbs. Investors should focus on areas where rental demand is strong, as rising yields could offset softer capital growth in the short term. For those looking for counter-cyclical opportunities, Melbourne presents an ideal market to enter. While the city may experience short-term challenges due to questionable government polices and sentiment, it offers significant potential for long-term capital growth. As one of the world’s most prolific investors Warren Buffet famously said, “Show greed when others show fear, and fear when others show greed” for heightened long-term returns.
- Growth in Brisbane and Adelaide
Brisbane and Adelaide are the cities to watch for 2025. With a strong local economy, ongoing population growth, and constrained housing supply, these markets are well positioned for continued growth, with some areas expected to see price increases of up to 15%. These cities offer an attractive environment for both investors and owner-occupiers seeking stable, long-term capital gains. Areas with excellent transport links, access to job centers, and new infrastructure projects will be particularly attractive.
- Perth: Caution Advised
While Perth has shown impressive short-term growth, Sound Property remains cautious about its sustainability. The market is currently being propped up by interstate investor demand, which may not be supported by local fundamentals. As seen in past cycles, Perth’s market can be volatile and may face significant corrections once investor demand slows. We believe the market is nearing the top of its cycle, and investors should approach with caution.
- Interest Rate Easing on the Horizon
The Reserve Bank may begin cutting rates as early as February, potentially revitalising buyer confidence. While this could lift prices in certain markets, the timing and magnitude of the cuts will be critical. We advise our clients to prepare for this shift by locking in favourable financing terms now and positioning themselves for an uptick in activity. If interest rates fall, competition in the market could intensify quickly.
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Final Thoughts
2025 is shaping up to be a year of both challenges and opportunities in the Australian property market. At Sound Property, we believe success lies in understanding the local dynamics, being prepared for market shifts, and making informed, strategic decisions.
If you’re considering your next property move or want to refine your portfolio, reach out to us. Together, we can craft a strategy tailored to your goals, ensuring you stay ahead in this dynamic market.
Here’s to a prosperous 2025 for all!
The Sound Property Team