Real Estate 2025: What’s Driving the Market?

The first half of 2025 has delivered a mixed but fascinating story for Australia’s property market. While national growth has steadied, regional differences have sharpened, especially in Perth, which continues to lead the pack.

After an extended period of monetary tightening, the Reserve Bank of Australia made its first rate cut in over four years, reducing the cash rate from 4.35% to 4.10% in February. This move has helped underpin national buyer confidence and contributed to a modest rise in dwelling values—up 1.7% nationally over the first five months of the year.

Although demand has stabilised, the construction industry continues to battle high building costs and labour shortages. Costs remain about 50% higher than pre-COVID levels, placing pressure on both new developments and timelines. Major builders, including Metricon, have flagged ongoing difficulties in meeting demand.

At the same time, government efforts to increase housing supply are beginning to materialise. The Housing Australia Future Fund, now capitalised at $10 billion, is targeting the delivery of social and affordable homes, but progress is still slow.

April saw the introduction of a two-year ban on foreign investors purchasing existing homes. While intended to free up stock for local buyers, the ban affects a relatively small number of transactions annually. On the flip side, overseas and repatriated capital continues to support new developments and the rental sector.

While eastern capitals like Sydney and Melbourne recorded subdued or negative growth, Perth’s property market has remained resilient. As of January, dwelling values in Perth had risen by 0.4% for the month, with annual growth sitting above 17%. REIWA forecasts a further 5-10% growth in 2025, with some analysts tipping up to 14-19% if interest rates continue to fall.

The recent opening of the Thornlie–Cockburn Metronet extension and last year’s Ellenbrook line have added new momentum to growth in Perth’s suburban corridors. Tight supply, strong population growth, and a high rental yield environment are all contributing to Perth’s continued strength.

In summary, while the national market is experiencing a period of recalibration, Perth continues to defy the trend thanks to a combination of infrastructure investment, affordability, and consistent demand. For buyers and sellers alike, 2025 has already proven to be a year of opportunity, especially in WA.