Major Changes Expected in Australia’s Property Market in 2025 – Big Banks Issue Warnings!

The Australian property market is set for a significant transformation in 2025, driven by the potential for interest rate cuts. According to Denton Pugh, Head of Home Lending at NAB, next year could mark a turning point for real estate across the country.

Inflation Data Signals Hope for Homeowners

The latest monthly inflation data from the Australian Bureau of Statistics offers a positive sign for homeowners who have been struggling with economic stagnation and sustained high interest rates. While annual inflation rose slightly to 2.3% in November—up from 2.1% in both September and October—the overall trend shows a decline in the average inflation rate.

Paul Ryan, a senior economist at REA Group, noted that the drop in the Consumer Price Index (CPI) was slightly larger than market expectations.

“This increases the likelihood of rate cuts happening earlier in the year,” he explained.

The most recent quarterly inflation data from September showed that inflation had fallen into the Reserve Bank of Australia’s (RBA) target range for the first time in three and a half years. If a similar trend is confirmed in the next update on January 29, mortgage holders could see relief much sooner than anticipated.

How Many Rate Cuts Can We Expect?

There is growing confidence that Australians will not only see one rate cut this year but multiple reductions throughout 2025. Predictions on when the RBA will start cutting rates have varied in recent months, with expectations shifting from February to April, and even as late as June. However, as inflation data continues to stabilize, confidence in earlier cuts has been improving.

NAB’s CEO, Andrew Irvine, stated in his economic outlook this week that mortgage holders could experience up to three rate cuts in 2025.

“We are at the most challenging point in the economic cycle right now,” he said. “But things will start to improve.”

While NAB expects the first rate cut to come in June, Commonwealth Bank, Australia’s largest home lender, remains optimistic that it could happen as early as next month. Meanwhile, ANZ and Westpac predict the first rate cut will likely come in May.

What This Means for the Property Market

According to property experts and economists surveyed by The Australian Financial Review, home prices are expected to grow by more than 4% this year. However, signs of a slowdown are already emerging—December saw a national decline of 0.1% in residential property prices, marking the first nationwide drop in nearly two years.

Sydney and Melbourne led the downturn, as the market struggled to absorb an increasing supply of properties while buyers faced affordability pressures due to high borrowing costs.

Despite the sharp rise in interest rates over the past two years, home prices have remained resilient, pricing many buyers out of the market. However, the recent slowdown suggests that growth is now reaching its limit.

“This ongoing affordability challenge continues to push demand towards more affordable properties,” experts noted.

The outlook for Australia’s property market in 2025 will largely depend on the timing and scale of interest rate cuts. While initial price growth may be slow, a more substantial rebound could occur later in the year if borrowing costs decrease.

For buyers, sellers, and investors, staying informed and prepared for market shifts will be key to making the most of the opportunities ahead.