Is now the best time to buy property? Explore market trends, interest rate impacts, and supply-demand dynamics shaping 2025. Learn how borrowing power, lending rules, and migration influence prices. With confidence at historic lows, strategic buyers can seize opportunities before the market heats up. If you're ready to invest, we provide expert guidance to help you make informed decisions.
It’s a question I get asked all the time. In this blog, I’ll share my take on what’s happening in the market, dive into the data, and look at what the next year might bring. If you’re wondering whether real estate should be on your radar, let’s explore it together!
Is Now the Right Time to Buy?
Property prices are closely tied to credit availability—essentially, "Can I get a loan?" When loans are accessible, demand rises, driving up prices. Surprisingly, this outweighs global macro factors. For example, Australian property prices fell less during the Global Financial Crisis than when APRA tightened lending rules.
During the GFC, property prices in Australia fell by less than 5%. Despite the media frenzy, the drop wasn’t as drastic as it seemed. While some people lost jobs, it wasn't widespread; it was more of a wealth transfer from those who couldn't hold on to those who could weather the economic storm—what we often refer to as the difference between "weak hands" and "diamond hands."
In comparison, APRA’s lending restrictions from 2016 to 2019 caused higher negative growth, exceeding 5%. This happened because fewer people could borrow, leading to decreased demand and falling prices.
What you see in the yellow bars represents negative growth, while the blue bars represent positive price growth.
Fast forward to 2020, when interest rates dropped. Initially, uncertainty held back price growth, but once confidence returned, prices skyrocketed. Following this, interest rate hikes led to a correction, not because rates directly lowered prices but because higher rates reduced borrowing power.
So, what happens if interest rates are cut?
The Impact of Interest Rate Cuts
A 1% (100 basis points) drop in interest rates increases borrowing power by 10%. For example, a $1 million capacity could rise to $1.1 million. With economists predicting a 1.5–2% rate cut soon, borrowing power might jump 15–20%. Combined with tax cuts, which could add another 5–6%, overall borrowing capacity could increase by up to 20%, significantly impacting property prices.
What’s often overlooked is how banks adjust their lending rules. Subtle tweaks to servicing calculators can boost borrowing power by another 5%, and different banks offer varying loan terms—sometimes differing by as much as $200,000. This makes working with a mortgage broker essential.
As credit availability rises and banks ease lending conditions to take on more risk, property prices are likely to climb. Understanding these shifts can help you stay ahead in the market.
Inflation and Interest Rate Cuts
Interest rate cuts are tied to inflation. This graph shows we’ve already passed the peak of the inflation crisis, and inflation is dropping steeply. Historically, steep inflation drops coincide with rate cuts, not hikes.
When interest rates rise, inflation often increases too—it's a delayed effect. Eventually, inflation slows down, and that’s when rate cuts come into play. While it might feel counterintuitive, this lag is a normal part of the process.
Right now, borrowing capacities could grow by 20–25%, but many people are still hesitant to buy property. Why? Consumer confidence is at its lowest point since the pandemic and even lower than during the Global Financial Crisis (GFC). This uncertainty makes people cautious despite the potential opportunities.
Should you buy property now? Ask yourself: do you want to buy at the peak of confidence or when it’s at its lowest?
During the pandemic, when confidence was at rock bottom, I said it was the best time to invest—and I was right.
If you can borrow now, think about what happens when confidence returns and rates start dropping. The government’s direction is clear, but fear keeps many on the sidelines. Back in late 2021 and early 2022, we saw what overconfidence did to property prices in cities like Sydney and Melbourne—they fell.
All signs suggest this is a strong time to buy, but that’s just the demand side of the story.
The Demand-Supply Balance
Imagine if supply were abundant, with properties available everywhere. In such a scenario, we’d see the basic laws of economics at play, where oversupply pushes prices down. However, we’re experiencing the opposite: a significant shortage of supply.
Now combine that with rising demand, fueled by several factors:
Stimulus Measures: Tax cuts and reduced interest rates are putting more money into people’s hands, driving economic activity and increasing purchasing power.
Lending Decline: Lending for purchasing and constructing new homes has dropped to levels not seen since 2010. This signals that fewer homes are being built, as fewer people are taking out loans for construction.
This creates a perfect storm: dwindling supply and surging demand—a state of disequilibrium.
We’re at levels not seen since 2010, and it’s concerning because this number is dropping rapidly. When this happens, fewer people are borrowing to build new homes.
What’s the result?
In 18 months, we could face a significant shortage of homes because it takes around 12 months to build a house. So, if you're expecting new supply to hit the market, think again—there simply won’t be enough, and whatever comes will be quickly absorbed due to the demand.
Looking at the data:
Migration Impact: Migration is another critical factor. It’s not just about the volume of people but also the type. While some migrants may rent, many high-net-worth individuals moving to Australia contribute to increased demand in the property market. Australia’s appeal—beautiful weather, stunning beaches, and a strong real estate market—attracts these buyers.
Why the Time is Now
With factors like stimulus, migration, supply shortages, and rising demand, 2025 is shaping up to be a standout year for property owners. These conditions make now an ideal time to enter the market. Waiting could mean paying significantly more as opportunities will still exist, but at a premium.
If you’re ready to buy and need expert guidance, book a call with us. As a full-time buyers agency handling multiple purchases weekly, we have the insights and experience to help you make smart decisions.
Let’s make 2025 your breakthrough year in real estate. Thanks for reading—see you in the next one.
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