Why the property market is about to take off – and where to watch it – realestate.com.au

Supply is down, demand is up, home prices are rising and buyers are feeling a renewed sense of FOMO. On the surface, all signs point to a real estate boom.

Ask the average person on the street where they see real estate prices in twelve months’ time and they will probably say: “higher”.

House price expectations hit a new 15-year high in October, according to Westpac’s monthly consumer confidence survey. Three-quarters of consumers expected property prices to rise over the next twelve months.

The sentiment is important, but it’s not just about the atmosphere. The data also shows that the real estate market is gaining strength.

National home prices hit a new record in September, with the value of an average home closing in on a million dollars ($935,000), while the average home now costs nearly $700,000.

Even Melbourne, which has lagged behind every other capital city over the past five years, saw property prices return to record highs last month.

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

That means all four major banks have upgraded their house price forecasts in recent months, with expectations ranging from 10 to 15% combined growth this year and next.

House price forecasts for the combined capitals:

The most bullish of the big banks, Westpac, upgraded its forecasts last month due to lower quotes and increased optimism among buyers.

To quote Matthew Hassan, head of Australian macro forecasting at Westpac, “If demand increases 10-15% from here, sparks could fly.”

Skip ahead to see the suburbs where demand is increasing.

What drives prices higher

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

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

All things being equal, a household able to borrow $500,000 in early 2025 would see an increase to $558,389 after four 0.25% interest rate cuts, an improvement of more than $58,000. This assumes a starting interest rate of 6.01% and that the lender fully passes on any interest rate reduction.

At the same time, the supply of homes for sale is far below the long-term average.

At a national level PropTrack data is displayed the number of new homes for sale in September was 4% lower than a year ago, and total inventory volume (new and older homes) fell 8% year-on-year.

Total listings in regional Queensland are down 43% compared to the long-term average. Photo: Getty

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

At a city level, Darwin is experiencing the biggest supply crisis, with around half the number of listings for sale than normal over the past eight years. Darwin has the fastest growing property market of any capital city, with prices up 11.4% over the past twelve months.

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

In contrast, total listings are about 10% higher than the long-term average in Melbourne, Sydney and Hobart, where price growth is more moderate. The total number of citations is about a quarter higher than usual in the ACT.

Outside the capitals, the better-performing regions also face a shortage of supply.

Townsville remains the country’s hottest property market, with prices up 15.7% in the past 12 months, after rising more than 80% since 2020.

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

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

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 coming year compared to 2024, while the number of sellers remains the same.

This is reaffirmed by PropTrack data, which shows that inquiries per listing have reached 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, allowing an unlimited number of eligible participants to purchase a home with as little as a 5% deposit.

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

Without the scheme, only 4% of this pool would have enough savings for a 20% deposit on an average-priced home – the deposit needed to avoid expensive 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 coming year, buyers are feeling a fear of missing out (FOMO).

The Property Seeker Survey revealed a new acronym among buyers – COMO (compromise or miss out) – with increased competition increasing buyers’ willingness to compromise on a property, although most are willing to make sacrifices on the property’s features rather than its location.

Identifying Demand: The Suburbs to Watch

Knowing where supply is declining compared to demand is an important 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 is booming, surveys, property inspections and sales can follow – and if the new supply doesn’t keep 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 across these hotspots is affordability and regional locations.

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

If the number of days on the market is low, it means that demand for real estate is high and as a result, homes are selling quickly, while a high number of days on market indicates that homes are taking longer to find a buyer, possibly 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 coming year, affordability remains a barrier for many potential buyers, likely limiting the growth rate of previous property runs.