Australia’s residential property market is expected to see steady price growth of 4-5% annually over the next three years, even as housing affordability remains stretched and interest rates stay high, according to a Reuters poll of property analysts.
The survey of 17 analysts conducted between May 16 and June 2 found that national home prices will rise by 4% in 2025, and by 5% in both 2026 and 2027, underpinned by strong demand and a chronic housing shortage.
While these gains are modest by historical standards, they follow a near-40% surge in prices over the past five years, delivering significant wealth gains to homeowners in a country where nearly two-thirds of households own property.
Price growth is expected to vary by region. Home prices in Brisbane, Adelaide, and Perth – cities that have seen values jump around 80% in the past five years – are forecast to rise 5.0% in 2025, the Reuters poll found.
Sydney and Melbourne, the nation’s two most expensive markets, are projected to grow more modestly, with analysts predicting gains of 3.5% next year.
Despite the Reserve Bank (RBA) holding its cash rate at a 12-year high of 4.35% throughout 2024, prices rose about 5% in the past year, driven by strong population growth, limited supply, and a resilient jobs market.
All 14 analysts who responded to a supplementary question said they expect RBA rate cuts to stimulate the market, although they don’t anticipate a sharp rise in price inflation.
The outlook was reinforced by RBA’s second rate cut of 2025, lowering the cash rate to 3.85%. Markets now expect at least two more cuts this year, with August and November seen as likely.
“We see a bit of a cap to the pace of home price appreciation in this cycle... While rate cuts would make it slightly easier for some borrowers to service the mortgage, it is quite minimal compared to the 13 rate hikes we’ve had since 2022 and it's also minimal versus how much prices have gained,” My Bui (pictured left), economist at AMP, told Reuters.
National home prices have now risen for four consecutive months, reaching a new record high of $831,288 in May, according to CoreLogic data. That figure is now nearly eight times the average annual income.
CoreLogic also reported a 0.5% national price rise in May and highlighted that growth is now strongest in the lower price segments. PropTrack data confirmed the upswing, with home prices rising 0.39% in May – the fifth straight month of growth and a new record high. Prices are now 4.12% higher than a year ago.
A slim majority of analysts see short-term affordability gains for first-home buyers, as falling mortgage rates reduce monthly repayments. Ten out of 13 analysts said purchasing affordability would improve in the coming year; three said it would worsen.
AMP estimates that a full percentage point cut in interest rates could reduce monthly repayments by around A$430 on an average mortgage of $652,000.
Still, deposit requirements remain a major barrier. Persistent price growth continues to challenge those saving for a first home.
“It's going to be more beneficial to people who were already very close to buying a place,” Tom Devitt (pictured right), senior economist at the Housing Industry Association, told Reuters. “The first couple of interest rate cuts will have almost immediately increased their borrowing power. So, they might be able to get across the line immediately and achieve home ownership.
“But relatively soon that will start putting upward pressure on prices again and so affordability is likely to deteriorate over the next few years until more fundamental reforms can actually boost housing supply.”
For many would-be home buyers, continued price growth will push them further into the rental market, adding pressure to already tight conditions. The median forecast from nine poll respondents projects average urban rents will increase between 3% and 4.5% over the coming year.
With improved sentiment, easing rates, and persistent supply shortages, Australia’s housing market is expected to continue strengthening through 2025. Analysts warn, however, that affordability will remain a drag unless structural reforms are implemented.
