Australian real estate heats up in 2025 amid global shifts

The Australian housing market is experiencing a significant surge in 2025, with national dwelling prices reaching unprecedented levels. This growth is largely fueled by increased investor confidence, policy changes, and renewed international interest, despite ongoing supply challenges.

According to Elite Agent, the national mean dwelling price exceeded AUD1 million (USD670,000) for the first time in January 2025. Major markets such as Melbourne, Sydney, and Brisbane are witnessing robust activity, driven by strong demand and the prospect of further interest rate cuts.

Melbourne market set to thrive

Melbourne is at the forefront of this real estate boom. Benson Zhou, Director – Hotels, CBD and Metropolitan Sales, State Head – Asia Markets at Savills Australia, and a member of the Judging Panel of the PropertyGuru Asia Property Awards (Australia), highlighted the city’s potential. “Melbourne’s housing market is set to remain buoyant in 2025,” Zhou stated. “A range of economic and policy factors [are] reinforcing demand despite ongoing supply constraints.”

One significant trend is the resurgence of international interest. As travel restrictions ease and the Australian dollar remains relatively weak, Melbourne is becoming an attractive long-term investment destination for overseas buyers. “A softer currency makes local real estate more attractive to overseas investors and expatriates, especially those seeking stable, long-term assets in a globally recognised city,” Zhou explained.

Policy tailwinds and supply pressures

While borrowing conditions are expected to improve with anticipated interest rate reductions, the market faces challenges. High construction costs and labour shortages are delaying project completions, limiting supply even as demand grows.

In response to the housing crisis, South Australia has introduced innovative planning reforms to expedite development approvals in key urban areas and promote medium- to high-density housing near public transport nodes. These measures aim to boost supply where demand is strongest.

Victoria is also pushing for streamlined approvals and increased density around transit hubs. Zhou noted, “The Victorian Government’s recent planning reforms—focused on streamlining approvals and encouraging density around transport hubs—are a step in the right direction, but their impact will take time to materialise.” He added, “In the short term, this means the imbalance between demand and supply is likely to persist, further supporting price growth.”

Buyers focus on education and lifestyle precincts

International buyers are particularly drawn to new apartments and townhouses near universities and lifestyle centres. Zhou observed, “Offshore buyers, in particular, may target new apartments and townhouses in key education and lifestyle precincts, boosting activity in areas close to universities and the CBD.”

The Australian rental market remains tight, offering attractive yields for investors. This, combined with increased purchasing power from lowered interest rates, is expected to boost both domestic and international investor activity.

Housing pressures in Western Australia

Meanwhile, Western Australia is grappling with its own housing crisis. Lui Violanti, Regional Manager – Western Australia, Inhabit Group and Vice Chairperson of the PropertyGuru Asia Property Awards (Australia) Judging Panel, described the situation as dire. “Here in Western Australia, the housing crisis has only intensified in the past two years,” he said. “Last week, the government media announced that the population of Western Australia has increased 2.4 percent and officially tipped over three million people, with the state having the fastest growth rate of anywhere in the country last year.”

Violanti cited the Housing Affordability in Western Australia 2025 report, which highlighted the state’s housing market under intense pressure from rapid population growth, slow housing supply, soaring rents, and construction delays. “With 119,000 new residents since 2023, demand for housing had surged way past supply,” he explained.

Western Australia recorded a shortfall of 4,000 new homes despite completing over 20,000 homes last year, the most since 2017. Violanti noted, “Building times in Western Australia were the highest in the country, taking more than 15 months to complete a house, adding AUD100,000 to the price of a new home.”

He also pointed out that many key workers, such as nurses, police officers, and firefighters, find themselves priced out of home ownership in many parts of Perth due to a growing discrepancy between wages and housing costs. “Rentals were also in short supply with a lack of 7,700 homes, pushing rents up 76 percent in the past five years and tenants out to the fringes of the metro area adding stress, complexity, and extra costs to their lives,” Violanti added.

Australia shines on the regional stage

Despite these challenges, Australia’s property market continues to gain international recognition. At the 19th PropertyGuru Asia Property Awards Grand Final 2024, Australian entries secured multiple accolades, underscoring the country’s architectural excellence and lifestyle-driven design. These achievements further solidify Australia’s role in shaping the future of urban living across the region.