End of financial year market review 2025 - John McGrath

I’m optimistic for the new financial year, with change afoot across the country. The gap in price performance between the states is already narrowing, and anticipated interest rate cuts throughout FY26 are likely to enable more buyers to enter the marketplace, sparking more uniform price rises.

Prices have softened in the powerhouse markets of Brisbane, Adelaide and Perth. Demand is still solid but competition is less fierce, giving buyers more negotiating power amid slower price growth.

Growth rates basically halved in FY25 compared to FY24. Dwelling values rose by 7.1% in Brisbane and 8.6% in Adelaide and Perth over the 12 months to June 1, Cotality data shows. Apartment values grew faster than houses, reflecting affordability constraints following substantial price growth.

The Sydney market cooled a bit in FY25 while the Canberra market found new foundations. Home values rose by 1.1% in Sydney and fell 0.7% in Canberra over the year.

Meanwhile, great value has inspired new activity in Melbourne and Hobart, where prices appear to have bottomed. Home values are down 1.2% in Melbourne and up 1% in Hobart over the year. Those who buy early into the new cycle will benefit most from reignited competition and price growth.

Similar patterns are at play in the regional markets. The strongest markets are cooling a bit, whilst buyers are recognising new opportunities in areas where prices have been off the boil for a period.

Regional Western Australia outperformed again with a 12.5% lift in home values over the year to June 1. South Australia followed with 12.4%, then Queensland with 8%. Regional NSW was in the middle with 3.3% growth, followed by regional Tasmania 2.3% and regional Victoria 0.1%.

As FY25 comes to a close today, this is a smart time for home buyers and investors to assess their options and act. I see plenty of opportunity for buyers all over the country right now.

Meanwhile, sellers can still expect very good results if their homes are marketed and presented well. The highest quality homes in the best locations are attracting the strongest interest.

Auction clearance rates in the capital cities averaged 65.3% over the four weeks ending June 1, up from 60.4% in the preceding month. A rate of 60% is the benchmark for a balanced market.

Economists are predicting several more rate cuts in FY26 and if this occurs, the impact will be broad-based but most acute in Sydney, given affordability is so tight in Australia’s most valuable market. The mortgage wars have restarted, with many banks offering highly competitive fixed and variable rates.

Housing supply remains constrained for now. We are yet to see a meaningful increase in new home building activity as a result of state and federal housing supply programs. This is not surprising, as it will take time for local councils to adapt to looser state planning regulations. Other challenges like the shortage of tradies and high prices for building materials remain, however, rate cuts may help.

In terms of homes for sale, tight supply continues to support values. Cotality data shows that the volume of new listings has consistently trended below the five-year average since January. The count of total listings nationwide as of June 1 was the lowest it has been for this time of year since 2007.

Demand remains strong, boosted by many baby boomers downsizing and using freed-up funds to support younger relatives to buy, buoyant investor activity, and more people who may have preferred to build deciding it’s too hard and competing in the established homes market instead.

Rents rose again in every capital city and regional market in FY25. Gross yields on apartments remain above 4% in every city and region and yields on houses are above 4% in all regional markets.

High rents are prompting more investor activity and inspiring more renters to buy their first homes. The promised expansion of the First Home Guarantee, which will allow all first home buyers, regardless of income, to purchase with a 5% deposit, no mortgage insurance and a government-guaranteed loan, will bring more young people into the market across the country.

Australia has one of the world’s most valuable property markets, with the prestige sector very strong in FY25. McGrath Research shows Australian waterfront residences are commanding much higher premiums than similar trophy homes in the world’s most desirable lifestyle locations.

But a highly valuable market means significant affordability challenges for low and middle income earners. However, people remain strongly motivated to achieve home ownership. Rising trends such as the Bank of Mum and Dad, rentvesting, city switching, co-ownership between friends and siblings, and multi-generational living are all examples of Australians’ creativity in finding ways to buy a home.