Investors shift focus in 2025 as property market evolves

In a year marked by significant changes in the Australian real estate landscape, investors have had to adapt to shifting market dynamics, as revealed by Domain’s End of Year Wrap 2025 report. The report highlights a reshuffling of priorities among buyers, driven by rising property prices, changing preferences for property types, and lifestyle amenities.

The capital city property markets have experienced a major transformation, with previously affordable capitals witnessing a surge in prices. Brisbane has emerged as the nation’s second-most expensive capital, while Adelaide and Perth have cemented their positions as higher-priced markets. By the end of November, house prices had increased by nine per cent nationally, while units saw a rise of seven per cent.

Despite three rate cuts aimed at alleviating financial pressure, the rising property prices have largely offset these savings, leaving buyers feeling the pinch. Nicola Powell, Domain’s chief of research and economics, noted that the year 2025 marked a turning point rather than a resolution for the real estate market. “By the close of 2025, it was clear the year had been a turning point rather than a resolution,” Powell stated.

As detached houses become increasingly unattainable, buyers have shifted their focus towards more affordable and versatile housing options. Domain’s search data indicates a growing interest in “duplex,” “dual living,” and “granny flat” properties, reflecting a nationwide trend towards flexible and lower-cost housing. The terms “granny flat” and “dual” have surged to the fourth and fifth most commonly searched terms nationally, while “duplex” has gained traction in regional markets.

Powell explained that many buyers have adapted to the changing market conditions by exploring smaller homes, different locations, or multipurpose living arrangements. “Buyers responded not by stepping back, but by adapting,” she said.

While capital city living remains popular, some buyers have turned to regional markets in search of better deals. Despite widespread interstate buying, the report reveals a preference for staying within one’s own state. Nearly half of Domain’s enquiries into regional Western Australia and South Australia have originated from Perth and Adelaide, respectively. In regional NSW and Victoria, approximately a quarter of searchers come from Sydney and Melbourne, highlighting a continued interest in more affordable options just outside major capitals.

Conversely, regional search activity has begun to soften, driven by a return to city-based living and a reduction in fully remote roles. Domain’s search results also show that while a home office or study remains desirable, its search volume has levelled off, with buyers viewing it as a luxury rather than a necessity.

For those with larger budgets, lifestyle-driven amenities such as “pool,” “waterfront,” and “view” remain highly sought after. However, terms like “water view” and “beach” have slipped in the rankings, suggesting a shift in priorities regarding higher-cost lifestyle features. In terms of home design, “art deco” style homes have gained popularity, climbing from 12th to sixth in search terms as buyers seek properties with design appeal.

The most favoured house type across six capital cities and regional markets is a detached house with four bedrooms, two bathrooms, and two parking spaces (4/2/2). Buyers looking for units prefer two bedrooms, one bathroom, and one car space, while those interested in townhouses favour a three-bedroom, two-bathroom, and two-car space configuration.

Looking ahead, Powell suggests that while price growth may slow towards the end of the year, buyers may need to wait before seeing a decline in prices. “Steady rates may actually help cool some of the late-year heat in the market, particularly as investors compete with first-home buyers supported by government incentives,” she noted. However, Powell cautioned that fundamental factors such as strong population growth, low vacancy rates, and persistent undersupply, exacerbated by high construction costs, are likely to keep prices buoyant through the first half of 2026. “Even so, the fundamentals aren’t changing,” she concluded.