Australia’s housing market is poised for recovery in 2025 despite recent headwinds. While the first half of the year may see continued moderation, lower interest rates and positive wage growth are expected to restore momentum by the latter half. Sydney’s luxury apartment market is forecasted to significantly outperform, with growth of 5.6% in 2025 compared to 1.4% for all dwellings.
The economic backdrop remains robust, with GDP growth accelerating and inflation normalising. A persistent supply-demand mismatch is expected to result in a shortfall of over 241,800 dwellings from FY 2023-24 to FY 2029-30. This undersupply, coupled with strong population growth, will continue to support housing demand.
Rental growth is moderating due to affordability constraints, but the market remains tight with low vacancy rates. Unit prices are expected to outperform house prices, driven by affordability factors and constrained new supply. While risks remain, the medium-term outlook for Australia’s housing market is positive, underpinned by population growth, tight rental markets, and chronic undersupply.
