March 19, 2025

Westpac Housing Market Update Summary March – 3rd of March 2025

The Australian housing market is delicately poised as 2025 begins, with price growth slowing, turnover declining, and affordability pressures remaining significant. The RBA’s recent rate cut of 25bps in February has started to influence buyer sentiment, but further reductions are expected to be gradual.

Key Market Trends & Performance

    • National home prices declined 0.2% over the three months to February, moderating from 10.9% annual growth in February 2024 to 3.5% year-on-year.

    • Turnover dropped 10% in the three months to January, exceeding the usual seasonal downturn, indicating weaker buyer activity.

    • Consumer sentiment is mixed—buyer sentiment has improved, but price expectations have softened.

    • Affordability remains stretched, with price-to-income ratios at record highs in Sydney (9.1x income) and Melbourne (6.2x income).

    • Rental markets are tight, with vacancies at 0.6% in Brisbane, 1.2% in Adelaide, and 2.0% in Sydney.

State-by-State Performance

New South Wales (Sydney) – Rebalancing Underway

    • Sydney dwelling prices fell 0.1% per month from October to January, before a slight uptick in February.

    • Turnover dropped 15% in the last quarter, with sales down 15.7% year-on-year.

    • Affordability pressures are acute, with the median dwelling price sitting at $994,000.

    • Rental market loosening slightly—vacancy rates rose from 1.8% to 2.0%.

Victoria (Melbourne) – Long, Shallow Correction

    • Melbourne home prices declined 3.2% year-on-year, with 11 consecutive months of price falls.

    • Turnover dropped 17% in the three months to January, the sharpest drop since September 2021.

    • Total listings remain high at 4.4 months’ worth of sales, indicating a buyer’s market.

    • Top-end properties fell 4.6% year-on-year, while lower-end homes held steadier at -0.9%.

Queensland (Brisbane) – Strong Growth but Slowing

    • Annual price growth sits at 9.8%, down from a peak of 14.6% in April 2024.

    • Unit prices (15.8% year-on-year) are outperforming houses (9.3%), as affordability pressures push buyers toward apartments.

    • Ipswich (10.1% growth) and Townsville (24.6%) are outperforming, while Gold Coast lags at 1%.

    • Rental market remains extremely tight, with vacancy rates at 0.6%, significantly below the long-term average of 2.9%.

Western Australia (Perth) – Losing Steam but Still Strong

    • Perth prices rose 15.3% year-on-year, slowing from 20.4% growth three months ago.

    • House prices are growing at 16.7%, unit prices at 20.6%, indicating ongoing strength.

    • Rental yields remain strong at 5.5%, with the lowest price-to-income ratio of 4.2x.

Supply & Affordability Challenges

    • New dwelling construction remains below demand, with only 171,000 completions expected in both 2025 and 2026, far below the 240,000 needed annually to meet government housing targets.

    • Household mortgage repayments as a share of income have surged, hitting 58% in Sydney and 39% in Melbourne.

    • First-home buyer activity remains low, with only 2.2% of respondents planning to buy in 2025, reflecting high deposit and borrowing hurdles.

Outlook for 2025 & Beyond

    • Westpac forecasts a 3% national price increase in 2025, rising to 7% in 2026 as affordability pressures ease slightly.

    • Interest rates are expected to decline another 75bps in 2025, with quarterly cuts before policy stabilises.

    • Market conditions are likely to “reconverge” across cities, with stronger growth expected in Melbourne and a cooling in Brisbane and Perth.

The housing market outlook remains uncertain, with competing forces of lower interest rates, weak affordability, and constrained supply shaping the trajectory for 2025.

Please refer to the for the full report – 3rd of March 2025 Westpac Housing Plus Australia’s Quarterly Housing Market Report