Housing affordability in Australia: 5 key trends to watch in 2025

Discover 2025 housing trends in Australia, interest rates, house prices, rental market pressures, and how Mondus Capital’s shared equity model can help.

Looking to finally buy a home in 2025? You’re not alone. However with housing affordability in Australia at an all-time low, soaring property prices and high mortgage rates, homeownership feels out of reach for many. But, with interest rate cuts on the horizon and new financing solutions emerging, there’s a glimmer of hope for first-home buyers and renters alike.

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Housing affordability in Australia reached record lows in the last quarter of 2024, making it now the most unaffordable housing market since record began in 1995. To buy a house in Australia you now need just shy of a million dollars, with median residential house prices at $985,900. This means housing only 14% of Australian median income households can afford to buy a home (only 10% in Sydney). Three years ago, it was 43%, according to Proptrack’s Housing Affordability Report. This puts the dream of home ownership even further out of reach for first home buyers. 

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The deterioration in housing affordability in 2023-24 was caused by continued high mortgage rates, combined with home prices that increased a further 6.6% over the same period. 

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While 2024 culminated in a dire situation for housing affordability, and the market remains extremely tight, there is hope ahead for 2025. 

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Here, we explore five key trends shaping housing affordability in Australia in 2025 and what they mean for you.

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Key takeaways from 2025 housing trends

• Interest rates are expected to decline mid-year, providing slight relief to mortgage holders.
• House prices are stabilising, with small declines forecasted in certain regions.
• Rental market pressures remain significant, although growth is slowing.
• Some Capital Cities and Regional markets, including Brisbane and Perth, are seeing continued growth.
• Housing supply shortages persist, with government initiatives aimed at addressing the gap.

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1. Interest rate cuts: A glimmer of hope

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After two years of aggressive rate hikes, the Reserve Bank of Australia (RBA) is expected to begin cutting interest rates at its next meeting in February 2025 (they have kept the official cash rate at 4.35% since November 2023). While early cuts are predicted to be small, they could provide some relief to mortgage holders. For example:

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A single rate cut could save a homeowner with a $600,000 loan approximately $92 per month.

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If NAB’s prediction of five rate cuts by 2026 proves accurate, savings could reach $441 monthly.

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This shift, while welcome, is likely to unfold cautiously as the RBA monitors inflation and employment indicators.

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2. House prices: A brief declineHouse prices are expected to experience a decline in the first half of 2025, having dropped in December for the first time in two years, which is good news for home buyers, however this is expected to be small and short-lived.

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PropTrack's Home Price Index index showed a 0.17% fall at the end of 2024, while CoreLogic's hedonic index points to a 0.1% decline ahead in 2025.  While this is welcome news for home buys, it shouldn’t be cause for alarm for home owners. 

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Nationally growth continues.  The median home price was 5.53% higher than a year ago, and up 45.8% since the start of the pandemic. For context, the largest national decline recorded in the index was 7.7 % between October 1982 and March 1983. So a shift of less than 1% is unlikely to be material

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However a cooling of the market is expected in 2025. Experts note that sustained higher interest rates are leading to fewer active buyers, more homes on the market,  and properties remaining on the market for longer periods. By the end of November, listings in capital cities were 4% higher than the same time last year. Additionally, rising cost-of-living pressures have prompted some homeowners to sell due to mortgage stress. This increase in supply offers a welcome opportunity for prospective home buyers.

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3. Capital city markets remain strong For a quick look around the country, housing affordability remains a challenge across Australia’s capital cities, with pockets of opportunity emerging.  Sydney, the largest and most expensive market remains steady, house prices in Melbourne continue to fall.  Growth in other major capital cities continues to reshape the housing market. 

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The median house prices in Adelaide ($814,430) overtook Melbourne ( $774,093) last year,  for the first time in history, according PropTrack, making it the country's fourth most expensive city. 

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Perth’s growth has continued upwards reaching an enorous 21% growth over the past year, where it remains the best performing capital city. Median dwelling value has also outpaced Melbourne for the first time since 2015. 

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Brisbane’s growth has been steady and strong, with property values increasing an average of 12%. While some experts warn Brisbane is reaching it’s peak, others argue that it’s likely to continue. 

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4. Supply challenges: A structural issue

Australia’s housing supply is failing to keep pace with demand. With only 420 dwellings per 1,000 people (below the OECD average of 468, and well behind the EU average of 517 dwellings), Australia faces a shortage of 1.2 million homes.

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Addressing this crisis requires:

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Constructing 240,000 homes annually—a goal that is already unmet (with only 163,836 new homes that commenced construction in 2023) due to rising construction costs (around 1% per quarter), labour shortages, and slow planning approvals.

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Government initiatives: housing is firmly on the Federal Government’s agenda, with the Housing Accord, plus  an extra $1 billion to states and territories to the Housing Support Program providing incentives to increase supply and reduce red tape.

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While these efforts are promising, tangible impacts will take time to materialise.

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5. Rental market pressures

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If housing prices and mortgage interest rate hikes weren’t enough, a further key driver of Australia’s housing crisis is surging rental costs, which hit a record high in 2024. The median weekly rent climbed to $627, reflecting an 8.5% year-on-year increase. According to CoreLogic’s National Rent Value Index, national rents have risen for an unprecedented 38 consecutive months, marking a 30.4% increase since the onset of the COVID-19 pandemic.

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This rental surge is compounded by a historically tight supply. Vacancy rates hit a record low of just 1.4% in 2024. While they have started to improve, reaching 1.8% by November 2025, this figure remains significantly below the pre-pandemic five-year average of 3.3%.

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Looking ahead, rental growth is expected to slow to 5.3% in 2025. In Melbourne, PropTrack data reveals that median rental costs for houses have stabilised. As a result, some investors are capitalising on capital gains by selling properties rather than holding them for rental income, increasing the housing stock available for purchase.

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Mondus Capital’s role in navigating housing challenges

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With rents surging, for many renters, paying a mortgage may now be within the ballpark of monthly rental payments. However, one of the biggest barriers is saving for the 20% deposit. After rent and living expenses, savings capacity is low.  It now takes the average Australian 11 years to save for a deposit, longer in Sydney. 

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At Mondus Capital, we’re here to make housing accessible for first home buyers. Our shared equity model, which provides deposit assistance and covers stamp duty, is designed to make homeownership more accessible, especially in a market rife with affordability challenges.

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We leverage cutting-edge AI-driven fintech to streamline the loan generation process, focusing on high-growth areas to maximise value for our clients. Our approach is tailored to address Australia’s housing affordability issues, helping to transform the dream of homeownership into a reality, one home at a time.

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FAQs about housing in 2025

1. Is now a good time to buy a home?

Yes, depending on your financial situation and location. House prices may stabilise, and interest rate cuts could make mortgages slightly more affordable. Explore regional opportunities for better value.

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2. How does shared equity work?

Shared equity allows you to co-own a property with an investor like Mondus Capital, significantly reducing upfront costs. You can refinance to full ownership over time. Find out more about shared equity here.

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Final thoughts

The Australian housing market in 2025 presents both challenges and opportunities. By staying proactive and partnering with trusted experts like Mondus Capital, you can navigate these complexities with confidence.

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Let us help you turn your dream of homeownership into reality. Contact us today for a personalised consultation.

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Market overview

The Australian property market is experiencing nuanced shifts, with significant regional variations. Cities like Brisbane and Perth are anticipated to see considerable growth in property values, with forecasts suggesting increases of up to 10% in Perth and 6-8% in Brisbane, according to CoreLogic and Ray White reports. This growth is primarily driven by strong local economies and the appeal of lifestyle-centric locations【Insights and Predictions for the Australian Property Market in 2025 - Phoenix Advisory Group】.

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Conversely, traditional powerhouses such as Sydney and Melbourne have witnessed a cooling down, with prices experiencing a slight decline. This trend is partly due to the dampening effects of high property prices on buyer activity and the overarching economic pressures that influence affordability【Key insights on Australia’s housing market and valuation trends for 2025 | CoreLogic Australia】.

Interest rates and economic influences

Interest rates continue to play a pivotal role in the housing market dynamics. Recent predictions from major financial institutions suggest a delay in expected rate cuts, now forecasted for mid-2025. This adjustment in monetary policy is likely to influence mortgage affordability and, consequently, property market activity【Insights and Predictions for the Australian Property Market in 2025 - Phoenix Advisory Group】.

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Economic indicators such as GDP growth, unemployment rates, and wage trends also significantly impact the market. With Australia showing signs of robust economic health, there's an optimistic outlook for property demand. However, the market remains sensitive to international economic currents and domestic policy changes, which could swiftly alter the trajectory【Ray White 2025 property market predictions: Key trends and insights | Australian Broker News】.

Regional markets and investment opportunities

The allure of regional markets has grown, with areas like the Gold Coast and Sunshine Coast seeing increased interest from buyers seeking more affordable property options and a higher quality of life. These regions offer promising growth potential, underscored by a balance of lifestyle appeal and economic viability【Insights and Predictions for the Australian Property Market in 2025 - Phoenix Advisory Group】.

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However, investing in regional markets comes with its own set of risks, such as potential volatility and economic dependency on specific industries, which could impact long-term property values【Insights and Predictions for the Australian Property Market in 2025 - Phoenix Advisory Group】.