Property market dips, a good time to buy?

By POPPY JOHNSTON

If you are looking to get on the property ladder and purchase your first home, 2025 might be a good year to do so.

Property prices around Australia have fallen for the first time in nearly two years and while interest rate cuts in 2025 will likely underpin more growth, any price bounce-back is expected to be modest.

Home values dipped 0.1 per cent in December, led by lower monthly declines in the two big capitals as well as Canberra and Hobart.

While further price gains were logged in the mid-sized capitals, growth in Perth, Brisbane and Adelaide has been slowing after a long run of sizeable price increases.

CoreLogic research director Tim Lawless was unsurprised by December’s negative national figure.

“This result represents the housing market catching up with the reality of market dynamics,” he said, referring to constrained borrowing capacity and cost-of-living pressures.

Interest rate cuts, expected from the Reserve Bank of Australia in the first half of 2025, should bolster demand for housing but Mr Lawless was not expecting a renewed phase of strong value growth.

Only a shallow round of interest rate cuts was expected by economists, he explained, which would leave the cash rate well above the pre-pandemic decade average of 2.55 per cent.

Affordability was already near its limits, particularly in Sydney and Adelaide, he said.

“It’s hard to see the housing market responding overly positively when we do have housing affordability quite stretched,” he said.

Changes to macro-prudential policies could be another spanner in the works, with regulators already alert to household debt levels.

“If we did start to see households taking on more debt as interest rates came down, that’s where we could see some additional credit controls coming into place,” he said.

In a welcome development for financially stretched renters, the 4.8 per cent rise in rents over the calendar year was the smallest annual lift since the 12 months ending March 2021.

Despite rents starting to stabilise as overseas migration returns to more normal levels and household sizes trend higher, annual growth is still double the two per cent pre-pandemic average.

AMP chief economist Shane Oliver was expecting a “year of two halves” for the property market, with weakness in the first six months off the back of still-elevated interest rates and rising unemployment.

AAP