Key Highlights from Q4 & SQM’S Predictions for 2025

• Housing prices softened across all major cities by the end of 2024, with Perth, Brisbane, and Adelaide showing slower but still positive growth, while Sydney and Melbourne experienced declines.
• Housing affordability has taken centre stage, surpassing demand as the key market driver.
• Outlook for 2025 hinges on the timing and magnitude of interest rate cuts, which will shape market conditions
• Investing ahead of rate cuts is critical for success, and expert guidance is essential to navigate this pivotal moment.

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Interest Rates

At the start of the year, the money market, stock market, and currency market are all experiencing a subdued phase, with little activity or clear direction emerging

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Housing Clearance

Its too early in the year for any meaningful capital city data, Corelogic shows a 65% clearance rate on only 243 auctions this weekend.

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In the final 3 months of 24 we saw a divergence in the housing market in the capital cities with Brisbane, Adelaide and Perth still strong, whilst both Sydney and Melbourne were significantly negative and presenting immense opportunity.

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And looking at the 2024 end of these multi-year graphs we can see how housing prices in all the major cities, even the high-flyers showed a downward trajectory. Note the light blue of Perth in particular which is tapering.

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The key driver in today’s housing market is affordability. Notice how the gold bars, representing the lowest-cost homes, consistently outperform median and premium-priced homes across every capital city. While demand for housing has never been stronger, the ability to afford it has never been weaker. This has led to a shift toward increased density—more people sharing homes—and a growing focus on affordable areas and property types

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Will this trend continue this year? SQM predicts the following:

The table above outlines four potential scenarios for the housing market in 2025, each reflecting different outcomes based on key economic factors. The most likely, or base case scenario, assumes continued high population growth and a rate cut in May. Under this scenario, property prices in Perth, Brisbane, and Adelaide are expected to continue rising, while Sydney and Melbourne may experience declines

In the best-case scenario, where interest rates are cut earlier in the March quarter, affordability improves significantly, reversing price declines in Sydney and Melbourne and driving price growth nationwide. Encouragingly, this scenario is gaining traction, with two of the four major banks favouring its likelihood. On the other hand, the worst-case scenario envisions reduced migration and no rate cuts, which would result in a fall in weighted average capital city prices by up to 4% this year, with sharper declines of 10% in Sydney and 9% in Melbourne. This would reflect less demand for housing and reduced financial capacity to pay for it. Fortunately, this outcome is currently considered the least likely of the scenarios.

It’s important to note that these projections are averages and do not reflect the nuances of individual markets. The property market is not homogeneous; certain properties in specific suburbs may perform exceptionally well, while others could underperform. While no one can predict the future with certainty, expertise and informed analysis can provide a critical edge in navigating market complexities. Acting before interest rates fall and seeking professional advice can be pivotal in ensuring success in your property journey.

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