Residential property sentiment has rebounded strongly in early 2025, as house prices rise and confidence lifts across most of the country.
NAB’s Q1 Residential Property Survey shows broad-based optimism driven by price growth, improving buyer sentiment, and February’s interest rate cut.
“February’s rate cut is also likely to have supported the lift in the NAB Residential Property Index to a well-above-average +40 after moving lower in the previous 3 quarters,” said Sally Auld (pictured), NAB executive chief economist. “Sentiment is now positive across the country, except the ACT.”
Confidence strengthened most in the Northern Territory (+100) and South Australia (+80), while Ne South Wales (+31) and Victoria (+16) also returned to positive territory after declines in previous quarters.
“With rates now lower and expected to fall further, confidence also improved,” Auld said.
“Most property professionals in WA, QLD, and SA assess market conditions as rising, approaching their peak or at the peak of the market, while VIC and NSW are at the start of recovery,” Auld said.
Auld noted a rise in foreign buyer activity in Q1 2025, likely due to regulatory changes.
“Foreign buyers were more active in March quarter but may have been prompted by temporary bans from purchasing established dwellings from April 1.”
The increase comes just ahead of the federal government’s April 1 restriction on foreign ownership of existing dwellings, potentially accelerating short-term demand.
“NAB’s outlook for property prices is broadly unchanged,” Auld said. “We see the eight-capital city dwelling price index ending the year around 3% higher, with a larger increase of around 6% over 2026.
“Expectations are most positive in the NT (5.0%) and WA (4.7%) and lowest in VIC (0.8%).”
Surveyed professionals also raised their outlook for rental growth, with expectations now at 2.2% over the next year and 2.7% in two years.
First-home buyers (FHBs) lost ground in the March quarter, while established buyers became more dominant.
“The market share of FHBs in new housing markets in the March quarter fell to 34.2% after climbing to a 2-year high 38.2% in the final quarter of 2024,” Auld said.
“Sales to owner occupiers (net of FHBs) however increased to an above average 41.7% (from 37.6%), but local investors were less active (16.3% down from 17.9%).”
A similar trend was seen in established markets, with owner-occupiers increasing to a three-year high of 46.2%, while foreign buyers also nudged up slightly to 3.1%.
“Following February’s rate cut, price levels and lack of stock replaced interest rates as the biggest constraint for established home buyers in the March quarter,” Auld said.
“Interest rates were however still viewed as the biggest constraint for home buyers in VIC, but price levels in NSW, and lack of stock in WA, QLD and SA.”
Construction costs and planning delays remain major barriers to new housing supply, especially in WA, NSW, and Victoria.
NAB, which recently expanded its proprietary lending team with 150 new hires, maintains a broadly positive view of the housing market, backed by a soft landing for the economy and moderating inflation, with further rate cuts expected to support ongoing price growth.
“Our forecasts for residential property prices are broadly unchanged, with the 8-capital city house price index expected to rise 3% this year and by around 6% over 2026 as falling interest rates support price growth,” Auld said.
“We now see the RBA cutting to 3.1% by August and then taking the cash rate to 2.6% by early-2026.”
