Property potential growing in 2025

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Global trade wars are unlikely to derail the 2025 Australian property market, which should benefit from rate cuts and owner-occupier upgraders, according to ME Bank

BROKERS COULD see a rise in both property market activity and house price growth in 2025, according to ME Bank, despite potential ructions in the global economy caused by the uncertainty around US tariff measures and their impact on global and regional trade. BOQ Group’s chief economist, Peter Munckton, told MPA affordability was the biggest constraint on residential property in 2024, which led him to predict low-single-digit growth in stand-alone house prices in 2025. But a backdrop of a “reasonable” economy and interest rate cuts could end up pushing overall stand-alone house price growth further up towards the mid-single digits. “Since the RBA rate cut in February, there’s been a little bit of life in the market, particularly in a couple of cities,” Munckton says. “There’s the possibility of two or more rate cuts to come, so we may see something north of the 1−2% growth in house prices we had been expecting.”

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Housing affordability hits new low in 2024

New South Wales

“There’s a possibility of two or more rate cuts, so we may see something north of the 1−2% growth in house prices we had been expecting for 2025”

Peter Munckton, Bank of Queensland Group

The affordability problem has been putting a break on the

Both major parties have been offering policies to support the housing market. Munckton says it was great that housing affordability was a key topic in the recent election. Policies that look to boost housing supply will be the important factor in increasing affordable housing. International politics is also an issue. Munckton believes the impact and uncertainty surrounding tariffs introduced by US President Donald Trump “could have a big influence” on local market conditions.

“There’s a range of views on whether this will have a negative impact on the Australian economy,” he says. “It is hard to know what the full impact of the US policies will be, but it is hard to think that there won’t be some impact on our economy.” Munckton says the last time Australia was impacted by weak growth among its trading partners was the Asian crisis in the 1990s. And while economic growth slowed during this period, “it wasn’t abysmal.” At the time, a fall in the value of the Australian dollar supported strength in exports. The RBA also responded with a reduction in interest rates. “I suspect those two things will probably happen again,” says Munckton. “The third potential positive is more fiscal support for the economy. So even if Trump’s tariffs are a negative, I think our economy will go through it.” The result for property could be positive. Though negative sentiment may temper large house price rises, as long as people believe they will get paid a reasonable income and have a job, and interest rates go down, those factors will serve to buoy property market fortunes. “If you get lower interest rates and decent economic growth, that’s usually a supportive enough backdrop for the housing market, and that’s what I suspect will happen,” Munckton says.

Reserve Bank data released in April shows most mortgage borrowers are in “reasonable nick”, with many having a fair bit of money stashed in their mortgage offset accounts. “The proportion of borrowers finding it really hard in terms of cash flow is actually down a little bit,” Munckton says. “Some borrowers, though, are still finding things are really tough.” ME Bank is predicting a resurgence in borrowing activity from owner-occupiers. “The part of the market that has really slowed a bit in recent times has been owner-occupiers,” Munckton says. “They’ve

Munckton is predicting some upside for Melbourne property prices in the shorter term. Relative to other markets, Melbourne property prices have not performed as well as in the other major cities in the last few years. It’s also a city where the increase in new housing supply is not as strong as in a number of the other capital cities, and the city also has strong population growth. Following strong runs over the last two or three years, brokers are likely to see slower house price growth in the Brisbane, Adelaide and Perth markets, as affordability limits the options of borrowers who are looking to purchase there.

ME Bank anticipates an improved year for the broker market in 2025. Demand was mixed across cities in 2024, but brokers faced rising costs due to inputs like labour and rent. “This year, an OK economy and lower interest rates should make for reasonable demand. And slowing inflation should see some slowing in cost growth,” Munckton says. However, he adds that more customer appetite for borrowing is likely to be met with pretty tough competition for broker business. “My advice to brokers,” Munckton says, “is whatever you do well, you should keep concentrating on doing those things because there’s going to be tough competition out there.”

Growth of real estate and profits from it. Development of the city, population growth. Economic growth, housing demand, and infrastructure development.

Affordability crisis could ease in 2025

Politics unlikely to negatively influence property

Published 19 May 2025

“My advice to brokers is, whatever you do well, keep doing it because there’s going to be tough competition out there”

Peter Munckton, Bank of Queensland Group

Housing affordability

Rental affordability

Victoria

Queensland

South Australia

Western Australia

Tasmania

Northern Territory

Australian Capital Territory

59.9%

28.0%

47.0%

21.5%

49.6%

23.0%

48.4%

25.5%

42.5%

24.3%

43.6%

26.6%

34.3%

24.3%

36.4%

19.2%

Note: Percentages represent the proportion of a median family’s income required to meet an average loan repayment in different Australian states in December 2024.

Source: Real Estate Institute of Australia (REIA) Housing Affordability Report, March 2025

Source: Reserve Bank of Australia Financial Stability Review, April 2025

The share of borrowers experiencing a “cash flow shortfall” with at least six months’ buffer saved. This has decreased from a peak prior to Stage 3 tax cuts and inflation moderation over the second half of 2024.

Severe mortgage stress remains contained

The share of borrowers experiencing a “cash flow shortfall” with less than six months’ cash buffer saved. This has also decreased when compared to levels recorded during the last half of 2023 and the first half of 2024.

Note: A cash flow shortfall occurs where minimum loan repayments exceed current income.

property market in recent times. Munckton says one symptom of this dynamic has been that the most affordable cities, like Perth, Adelaide and Brisbane, have seen the strongest house price growth over the last couple of years. “The strongest price growth has also been at the cheaper end of the housing market,” he adds. “That’s been a universal story across all cities.” Population growth was also strong over the last three or four years, causing upward pressure on prices and reducing affordability. Rent costs and mortgage costs relative to incomes have been relatively high, making it harder to purchase a property. Munckton says conditions are now changing. Population growth is slowing, and new supply, which has been very low in most cities, is starting to pick up. “We’re starting to see a bit of a turnaround in housing approvals,” he says. “As we go through the year, there’ll be more new supply, and I think that we will also get more stock on the market. So that’s a big thing; supply is going to increase over the next year or two.” The expected reduction in interest rates is another factor. The RBA dropped rates by 25 basis points in February, and Munckton says that with the tariff and trade turmoil happening globally, the RBA might end up cutting rates at least an additional two times. “So, with that slowing in population growth, all of a sudden affordability becomes a little bit better if you can get more rate changes. So there will be offsetting factors impacting demand, and you’re likely to get a somewhat higher supply,” he says.

Broker competition about to heat up

been saying, ‘I’ve got a fair size mortgage, the cost of living’s really tight right now, so do I want an even bigger mortgage?’” However, with predictions that wage growth will be higher than inflation, the benefits of recent tax cuts and the potential for interest rate reductions, those people thinking about trading up homes might become a bigger part of the market this year. If affordability does improve, Munckton says those trading up could be joined by a modest increase in the number of first home buyers. There may also be greater demand for units where price growth has fallen behind that of stand-alone houses in recent years.

Owner-occupiers could seek to upgrade

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