The Housing Market in 2025

Housing in Australia is without doubt the hottest political topic right now and will likely be for a long time. Following an election in May that was dominated by competing housing policies, the elected Labor Government then sought to roundtable the issues facing the housing sector via a wide-ranging productivity summit. Definable results from that summit are yet to be realised, but while governments grapple with how to fix this problem, the housing market continues to heat up, with three interest rate cuts already this year (and more possibly to come) fuelling property prices that were already out of reach for most.

Following their landslide victory at the Federal election, the Labor government has moved swiftly to implement one of the key housing policies promised during the campaign, that being the expansion of the First Home Guarantee. This policy has been in place for some time but on a limited basis, with the government now offering 5% deposits to all first home buyers. Under the scheme, property price caps will rise, but there are no income limits for applicants or caps on places. For the average first home buyer, this scheme cuts years off the time it takes to save a deposit while also saving applicants the financial burden of Lenders Mortgage Insurance.

In MAB’s 30-year history, we have delivered many homes to first home buyers and understand how difficult it can be saving for a deposit, especially when banks often require a full 20%. It’s hard not to support this scheme as a way of getting more young people into their first homes but it will likely push up house prices with buyers having more in their pocket to spend. Buyers also need to be wary that even though the deposit hurdle has now been lowered, mortgage serviceability is still very much an issue and one’s ability to meet the required repayments will ultimately determine whether you can buy that home you want.

Mortgage serviceability constraints are unfortunately only likely to become worse following the recent interest rate cuts by the Reserve Bank of Australia. After a period of modest price growth, these recent cuts have seen Australian house prices rise again as the demand / supply equation continues to benefit sellers, rather than buyers.

As you’ve likely heard from media outlets and politicians, more housing supply is the key to shifting that demand / supply problem that will ultimately help keep prices subdued. However, critically in Australia right now, we just can’t build enough homes. A distinct lack of building trades has caused construction prices to skyrocket since the pandemic, which, when coupled with poor credit availability has led to some of the worst development conditions ever experienced.

But it’s not all doom and gloom if you’re on the hunt for a new home. Savvy buyers looking at almost complete, or newly completed apartments and townhouses, can benefit from developer pricing that reflects pre-covid construction costs.