The Australian property market saw a slight decline in prices in January 2025, marking the first drop in almost two years. This trend, influenced by economic conditions and high interest rates, follows a prolonged period of growth.
Experts are divided on how long this downturn will last, with some suggesting that upcoming monetary adjustments could reverse the trend. However, signs of a swift recovery remain uncertain in the short term.
Market Overview: A 0.08% Decline in January
Data from PropTrack reveals that national house prices in the property market fell by 0.08% in January, following a similar 0.17% drop the previous month. This marks the second consecutive monthly decline after months of price increases from February 2024. Despite this, house prices have still risen by 45% since March 2020, reflecting the overall trend of growth seen over recent years.
Factors Behind the Decline: Interest Rates and Affordability Issues
The primary factors contributing to the current downturn include persistent affordability challenges, weaker economic conditions, and the sustained higher interest rate environment. According to REA Group’s senior economist, Eleanor Creagh, the softer end to 2024 has extended into the new year, with housing demand remaining resilient despite these issues.
Capital City Performance: Hobart and Sydney Lead the Decline
January saw significant price declines in several capital cities, with Hobart experiencing the largest drop at -0.46%, followed by Melbourne at -0.30% and Sydney at -0.23%. Adelaide and Perth saw minimal changes, with Perth staying flat and Adelaide falling by just 0.07%. Brisbane, however, was the exception, with a modest price increase of 0.08%.
City Performance Overview (January 2025)
Here is a summary of the performance of Australia’s largest capital cities in January 2025:
| City | Price Change (%) |
|---|---|
| Hobart | -0.46% |
| Melbourne | -0.30% |
| Sydney | -0.23% |
| Adelaide | -0.07% |
| Perth | 0.00% |
| Brisbane | +0.08% |
Regional Areas Continue to Outperform
Despite the national downturn, regional areas are showing resilience, with Perth, Adelaide, and Brisbane still leading the charge in property price growth. Over the past year, these cities have experienced impressive increases, outperforming their capital city counterparts.
Top Performing Regional Areas (2024-2025)
Here’s how some of the top-performing cities have fared in the last year:
- Perth: +15.38%
- Adelaide: +12.41%
- Brisbane: +10.44%
These figures indicate a steady rise in property prices in these regional cities, despite the broader market trends.
What the Future Holds: Interest Rate Cuts Could Spur Market Recovery
Looking forward, analysts believe that the property market downturn may be short-lived. Several major Australian banks are predicting a rate cut by the Reserve Bank in February, which could help to ease some affordability issues. Lower interest rates are expected to boost borrowing capacities, driving renewed demand and potentially contributing to a recovery in house prices by the latter half of the year.
However, experts also caution that while prices may rise, the recovery could be slower compared to previous cycles due to the ongoing challenges with affordability and the already stretched market conditions. The pace of growth is expected to be more moderate than in the years prior.
