The national housing market has continued its raising trajectories in the past 12 months, recording 3.4% growth in capital cities and 4.6% in regional areas. Notably, there is a large difference in the pace of growth between cities, with minimal growth rates in Sydney – 2.5%, Melbourne – 1.7% and strong growth rates in Adelaide – 10.7%, Perth – 8.9% and Brisbane 7.9% in the past 12 months.
The housing market dynamics in the next 12 months will be driven by the key factors that include Housing Supply, Home Buyers’ Sentiment, Interest Rate Cuts and Multiple Generous Government Grants for first home buyers.
Low housing supply
A notable trend observed since 2020 has been the persistent decline in the number of property listings in many capital cities, with total listings dropping from approximately 300,000 listings before 2020 to around 230,000 since 2021, representing a 23% decrease.
While Sydney and Melbourne have maintained similar listing levels before and after 2020, with 30,000 listings in Sydney and 40,000 in Melbourne, other mid-sized cities have experienced notable declines. Brisbane’s listings fell from 30,000 to 18,000, a 40% drop; Adelaide saw a reduction from 16,000 to 8,000, down 50%; and Perth’s listings decreased from 27,000 to 15,000, a decline of 44%.
Conversely, Canberra and Hobart have recorded significant increases in listings, rising from 2,500 to 4,500 in Canberra and from 1,200 to 3,000 in Hobart.
This trend highlights ongoing challenges in housing supply in Brisbane, Adelaide, and Perth, affecting the property market dynamics in these cities, which are reflected in low vacancy rates and surging sale and rental prices over the past three years.
Rising buyer activities
According to the Australian Bureau of Statistics (ABS) lending indicators data released in March 2025, total housing loan commitments have shown an overall upward trend. They increased from $66 billion in February 2023 to $87 billion in March 2025.
Owner-occupier loan commitments have displayed a notable upward trend, rising from $43 billion in February 2023 to $54 billion in March 2025. This increase indicates strong demand that is driven by factors such as high population growth and the availability of first home grants across the states.
Investor loan commitments have followed a similar pattern, rising from $22 billion in February 2023 to $32 billion in March 2025. As investors play a crucial role in the dynamics of the housing market, the rise in investor loan commitments suggests the strong prospects of the property market in the years ahead.
Nationally, the share of investor loan commitments has shown a steady increase over the last 16 months, currently comprising 37% of new mortgage lending as of March 2025.
Inflation has slowed and interest more rate cuts are underway
The monthly CPI indicator rose 2.4% in the 12 months to March 2025. This is the lowest figure since August 2021, entering the central bank’s target range of 2 to 3% for the first time in three years.
An alternative measure of inflation – the trimmed mean measures underlying inflation that reduces the impact of irregular or temporary price changes. Annual Trimmed mean inflation which excluded both the falls in Automotive fuel and Electricity, alongside other large price rises and falls, was 2.9% in March 2025, also within the target range of 2-3%.
Major economies, including the U.S. and the Euro Area, have begun easing monetary policy with significant rate cuts: a 1% drop from 5.5% to 4.5% in the U.S., and a 2.1% drop from 4.5% to 2.4% in the Euro Area.
Overall, more favorable global and domestic macroeconomic conditions are paving the way for interest rate cuts in Australia. This would substantially enhance borrowing capacity, potentially driving increased pressure on property prices.
Government grants for first home buyers
Eligible first home buyers can now purchase a property with as little as a 2% deposit through the Federal Government’s Family Home Guarantee (FHG) — a program under the Housing Australia initiatives. This scheme is specifically aimed at single parents with at least one dependent child, helping them buy a home sooner without needing a large deposit or paying lenders’ mortgage insurance (LMI).
Under the Family Home Guarantee, the government guarantees up to 18% of the home’s value, enabling eligible buyers to secure a mortgage with just a 2% deposit. The property must be within price caps that vary by region (e.g., up to $900,000 in Sydney, $700,000 in Brisbane, etc.).
In addition, other schemes such as the First Home Guarantee (previously First Home Loan Deposit Scheme) allow eligible first home buyers to buy a property with a 5% deposit and no LMI. These schemes are available through participating lenders and are subject to annual caps (e.g., 35,000 places per year for the First Home Guarantee) significantly influencing the entry-level property market.
The new grants will enable up to 100,000 home buyers to enter the market with low deposits, which will create significant demand and pressure on prices, especially in the affordable segments of the market.