End-of-year wrap: 2025 in the rear-view mirror - John McGrath

With just over two weeks of 2025 remaining, Christmas budgets are expected to be as tight as they were last year as the cost-of-living crunch continues. But there has been some good news for the property market this year, and there could be more to come in 2026.

Firstly, as discussed in the McGrath Report 2026, some of housing’s major issues, such as construction cost increases, began to moderate this year. State governments are also beginning some planning reforms which will hopefully expand supply.

While starting to stabilise, buyer demand throughout 2025 has been very solid, led by the top end of the market. This year’s first three rate cuts since November 2020 saw first-home buyer demand rally towards the end of this year too. Government incentives such as the expanded 5% deposit guarantee scheme, from October 1, further encouraged this group.

On the subject of interest rates, they are hard to read so it’s difficult to forecast what will happen in the new year. The experts were all predicting further rate reductions but that view seems to have softened, with some even predicting a rate rise.  I think we will see lower rates by the end of 2026, but it may be slightly slower than originally predicted.

In the meantime, and similar to this time last year, Perth, Brisbane and Adelaide have continued the strong performance growth that has been evident since late 2023. However, Sydney remains Australia’s powerhouse property market with elevated demand from first home buyers, including rentvestors.

This is notwithstanding Sydney’s $1,269,659 median value being the highest in the country, according to Cotality’s November Home Value Index. Melbourne has all the signs to be a standout performer over the next 18 months, followed closely by Sydney. The southern city’s property market has gained momentum this year with its $823,495 median price offering the best value in Australia by far, with prices certain to rise significantly over the next three years.

Meanwhile, Queensland continues to enjoy a very strong run with Brisbane’s median house value surpassing $1 million for the first time in May this year. It is now Australia’s second most expensive capital city, after Sydney. Queensland overall should stabilise around these levels, with prices are due for a pause next year.  However, there should be some further growth in the upper end of the market, as demand for prestige property continues unabated across the country.

Plenty of other noticeable property trends continued to enjoy popularity this year as well. The cashed-up Generation X group – otherwise known as the Sandwich Generation – is now the overall capital gains winner in the Australian generational real estate race.

The appeal of “walkable” neighbourhood living in both metropolitan and regional areas is continuing to increase while rural centres overall are still highly popular. Then there is multi-generational housing, sustainable and environmentally-friendly homes, and our enduring love for our pets. Such factors are now changing how Australian properties are being constructed and what buyers are looking for.

You can read more about these trends here.

For now, this is my last article for 2025. I’ll be back in mid-January with further property market insights for the upcoming year. Meanwhile, I hope you have a very happy and safe Christmas and holiday period.