Why the property market may be about to take off – and where to watch

Supply is down, demand is up, home prices are accelerating and buyers are feeling a renewed sense of FOMO. On the surface, all signs are pointing to a property boom.

Ask the average person on the street where they see property prices in 12 months’ time, and they’ll likely say “higher”.

House price expectations hit a new 15-year high in October according to Westpac’s monthly survey on consumer sentiment, with three quarters of consumers expecting property prices to rise over the next 12 months.

Sentiment is important, but it’s not just a vibe – the data also shows the property market is gaining pace.

National home prices reached a new record high in September, with the value of a median house moving closer towards a million dollars ($935,000), while a typical unit now costs almost $700,000.

Even Melbourne, which has lagged every other capital city for the past five years, saw property prices return to a record high last month.

The latest PropTrack Home Price Index shows price growth has accelerated since the Reserve Bank of Australia began cutting interest rates in February, and economists at the major banks are still predicting at least one more interest rate cut this cycle.

That’s seen all four major banks upgrade their home price forecasts in recent months with expectations ranging from 10-15% combined growth over this year and next.

Home price forecasts for the combined capital cities:

The most bullish of the big banks, Westpac, revised its forecasts higher last month on the back of lower listings and increased buyer optimism.

To quote Westpac’s head of Australian macro-forecasting Matthew Hassan: “If demand rises 10-15% from here, sparks may fly.”

Jump ahead to see the suburbs where demand is on the rise.

What’s driving prices higher

The RBA has cut interest rates three times this year, and as of this week, the market was pricing in a 74% chance of another rate cut in November.

Data from Mortgage Choice shows a total of four interest rate cuts could add tens of thousands of dollars to a household’s borrowing power.

All things being equal, a family able to borrow $500,000 at the start of 2025 would see that rise to $558,389 following four 0.25% rate cuts, an improvement of more than $58,000. This assumes a starting interest rate of 6.01% and that the lender passes on each rate cut in full.

At the same time, the supply of homes for sale is sitting well down on the long-run average.

At a national level, PropTrack data shows the number of new homes listed for sale in September was 4% lower than a year ago, and the total volume of stock (new and older listings) was down 8% year-on-year.

There are now 17% fewer homes listed for sale on realestate.com.au than has been typical over the past eight years.

At a city level – Darwin is feeling the biggest supply crunch with around half the number of for-sale listings than has been typical over the past eight years. Darwin has the fastest growing property market of all the capital cities, with prices up 11.4% in the past 12 months.

Perth (-40% total listings compared to long-run average), Brisbane (-37%) and Adelaide (-33%) have also had their stock levels depleted by booming sales activity in recent years.  

By contrast, total listings are around 10% higher than the long-run average in Melbourne, Sydney and Hobart where price growth is more subdued. Total listings are around a quarter higher than typical in the ACT.

Outside of the capital cities, the outperforming regions are also seeing a supply crunch.

Townsville remains the hottest property market in the country with prices up 15.7% in the past 12 months, having surged more than 80% since 2020.

Total listings across regional Queensland are down 43% compared to the eight year average, regional South Australia has 38% fewer listings, and regional WA listings are down by almost half (45%).

So buyers have more money to spend on fewer homes, and demand data suggests buyers activity is heating up.

The annual realestate.com.au Property Seeker Survey, conducted in June with more than 15,000 participants, shows an increase in the number of people looking to buy a property in the year ahead compared to 2024, while the number of sellers remains flat.

This is reaffirmed by PropTrack data which shows the number of enquiries per listing is at a three-year high and search activity on realestate.com.au is the strongest since late 2021.

Why first-home buyers are a force to be reckoned with

Then there’s the expansion of the government’s Home Guarantee Scheme for first-home buyers, which allows an unlimited number of eligible participants to purchase a home with a deposit of as little as 5%.

Westpac has crunched the numbers on its savings accounts and found that around 15% – or roughly one in six – young Australians without a mortgage have enough savings to purchase a median priced home under the scheme, using a 5% deposit (or at least $41,000).

Without the scheme, just 4% of this pool would have enough savings for a 20% deposit on a median priced home – the deposit required to avoid costly lenders mortgage insurance (LMI).

Anecdotally, real estate agents are already experiencing an increase in demand from first-home buyers, and with expectations for further price growth in the year ahead, buyers are feeling a fear-of-missing-out (FOMO).

The Property Seeker Survey uncovered a new acronym among buyers – COMO (compromise or miss out) – with stronger competition increasing buyers’ willingness to compromise on a property, though most are prepared to make sacrifices on property features rather than location.

Identifying demand: The suburbs to watch

Knowing where supply is dwindling compared to demand is a key part of identifying where home prices will rise, and a sharp increase in search activity can be a useful leading indicator of where demand is about to take off.

Where search activity sharply grows, enquiries, property inspections and sales can follow – and if new listings aren’t keeping up, home prices typically rise as buyers miss out on sales.

New data has revealed 70 suburbs where searches have more than doubled compared to a year ago, and the theme in these hotspots is affordability and regional locations.

Days on market is another useful data point for identifying demand, with PropTrack data revealing where properties barely last a week on the market.

If days on market are low, it means demand for properties is high and homes are being sold quickly as a result, whereas a high number of days on market indicates homes are taking longer to find a buyer potentially due to factors such as an abundance of homes or low demand for that area.

While further price growth is expected across the country in the year ahead, affordability remains a barrier for many potential buyers, likely capping the pace of growth seen in previous property runs.

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