In a nation where the great Australian dream of home ownership often feels more like a fantasy, all eyes are on the housing market’s every move. The latest prophecy from property seers SQM Research unveils a divergent destiny for our two biggest cities, while other capitals ride a wave of growth. But will falling prices actually make a dent in the housing affordability crisis?
Sydney and Melbourne Brace for Falling Prices
SQM Research’s crystal ball reveals that Sydney and Melbourne, the jewels in Australia’s property crown, are set to lose some of their sparkle in 2025. The report projects that home values could tumble by up to 5% next year in these overheated markets, as sky-high borrowing costs finally take their toll.
“Interest rate levels are biting the community more in areas with overvalued property markets or those experiencing slower economic growth,” explains Louis Christopher, SQM’s managing director. The anticipated pullback remains modest though, dashing hopes of a significant correction that could bring prices back within reach for aspiring buyers locked out of these lucrative but exorbitant markets.
Smaller Capitals Poised to Boom
In a striking contrast, SQM predicts that while the big smoke battles a slowdown, other capitals are poised for a property boom. Perth is tipped to lead the pack with a staggering 19% surge in prices, followed by Brisbane at 14%, and Adelaide at 13%. The projections hinge on a few key assumptions though:
- A much-anticipated interest rate cut by mid-2025
- Continued strong population growth
- No nasty inflation surprises
The smaller cities’ meteoric rise is fueled by an ongoing housing shortage, as supply struggles to keep pace with robust population growth and solid employment rates. “Ongoing strong population growth, combined with strong employment growth and an existing undersupply of homes for sale will keep driving Perth dwelling prices up over the course of next year,” the report highlights.
A Tale of Two Forecasts
However, SQM’s forecasts paint a drastically different picture if a few pieces don’t fall into place. If inflation remains stubbornly high and rate cuts are off the table, Sydney could be staring down the barrel of a double-digit decline, with Melbourne not far behind. In this gloomier scenario, the projected gains in the other capitals would also be severely tempered.
Overall, if the base case pans out, Australia’s capital city prices are set to eke out a modest 1-4% growth in 2025. But that’s cold comfort for those eagerly waiting on the sidelines, hoping for a more significant pullback to break into the market. The anticipated dip in Sydney and Melbourne remains slight, while the other capitals’ surge could push prices further out of reach.
Housing Affordability Crisis Rolls On
For many Australians, the projected price moves offer little relief from the housing affordability crisis that has reached fever pitch. Even a 5% dip would barely make a dent in Sydney’s median house price, which has skyrocketed to an eye-watering $1.6 million. That’s over 14 times the average household income, according to recent figures from Demographia.
As one exasperated millennial put it, “A 5% drop on a million-dollar mortgage is still a million miles away from what I can afford. It feels like we’re just watching the market from afar, with no hope of ever getting a foot in the door.” This sentiment echoes across a generation that fears being forever priced out of the property market.
While governments at both the state and federal level have announced various initiatives to boost housing supply and assist first home buyers, many experts argue that these measures merely tinker around the edges without addressing the root causes of the affordability crisis.
The housing market is like a giant cruise ship. It takes a lot more than a few policy tweaks to turn it around. We need a fundamental rethink of how we approach housing in this country, from tax settings to urban planning to investment incentives.
– Housing policy expert, speaking on condition of anonymity
As the nation holds its breath for the RBA’s next move and SQM’s predictions play out, one thing is clear: Australia’s housing affordability woes are far from over. For countless aspiring homeowners, the great Australian dream remains just that – a dream, drifting further out of reach with each passing year. Until policymakers take bold, decisive action to tackle this growing crisis head-on, the lucky country risks becoming a land of haves and have-nots, divided by the unscalable walls of property ownership.
For many Australians, the projected price moves offer little relief from the housing affordability crisis that has reached fever pitch. Even a 5% dip would barely make a dent in Sydney’s median house price, which has skyrocketed to an eye-watering $1.6 million. That’s over 14 times the average household income, according to recent figures from Demographia.
As one exasperated millennial put it, “A 5% drop on a million-dollar mortgage is still a million miles away from what I can afford. It feels like we’re just watching the market from afar, with no hope of ever getting a foot in the door.” This sentiment echoes across a generation that fears being forever priced out of the property market.
While governments at both the state and federal level have announced various initiatives to boost housing supply and assist first home buyers, many experts argue that these measures merely tinker around the edges without addressing the root causes of the affordability crisis.
The housing market is like a giant cruise ship. It takes a lot more than a few policy tweaks to turn it around. We need a fundamental rethink of how we approach housing in this country, from tax settings to urban planning to investment incentives.
– Housing policy expert, speaking on condition of anonymity
As the nation holds its breath for the RBA’s next move and SQM’s predictions play out, one thing is clear: Australia’s housing affordability woes are far from over. For countless aspiring homeowners, the great Australian dream remains just that – a dream, drifting further out of reach with each passing year. Until policymakers take bold, decisive action to tackle this growing crisis head-on, the lucky country risks becoming a land of haves and have-nots, divided by the unscalable walls of property ownership.
