"Political, economic, environmental and other factors are expected to shape housing policies and investor decisions this year." - Matthew Lapish, Senior Investment Analyst
Leanne Pilkington, President, Real Institute of Australia (REIA), has exclusively shared her insight into what she regards as the top ten factors that will shape the property market over the next 12 months.
These ten variables will determine not only how the market performs and thereby guide property investor decision making, but they will also do much to shape our economy and society.
The housing crisis will dominate political platforms in the lead-up to the federal election. With housing being a critical issue for Australians, major parties, minor parties and independents must present robust housing policies to address this national challenge effectively.
Housing supply will remain a key concern, heavily influenced by the outcomes of the federal election.
From energy efficiency disclosure at the point of sale to improving rental property standards, sustainability will continue shaping housing policy and Australia’s progress toward environmental targets.
Market trends suggest the possibility of a rate cut at the Reserve Bank of Australia’s 18 February meeting, potentially easing pressure on borrowers and stimulating buyer activity. The market is anticipating more than one rate cut this year.
With limited supply and growing demand driven by population increases, rental prices are set to rise further in 2025. However, policies like rent freezes or caps could discourage private investment, exacerbating affordability issues. The change in taxes and also legislation has seen investors exit states like NSW and Victoria with many of them looking to other states, impacting supply and therefore affordability in those states.
Following the passage of build-to-rent legislation in late 2024, this sector is expected to gain momentum, introducing new supply to the rental market and easing some pressure. Limited numbers will mean the impact is not huge, and much of it will not be affordable.
As construction costs stabilise and demand from pandemic-era incentives wanes, building completions are likely to help address supply shortages. However, builders will continue facing challenges from fixed-price contracts with tight margins and also a lack of tradies. The industry has not been helped by residential construction costs growing 3.4 per cent over the 12 months to December 2024.
Despite a potential rate cut in February, high interest rates and record-low housing affordability will keep many homeowners under financial strain.
The Commonwealth’s Help to Buy scheme and emerging private shared equity programs will be ones to watch in 2025. Uptake of these initiatives will provide insights into their impact on housing affordability.
Both major parties remain committed to the current tax settings, despite pressure from The Greens to reform policies around negative gearing and capital gains tax. History demonstrates that changes to these policies can deter private investors, reducing rental stock and worsening supply issues. Australia’s family investors contribute approximately $3 trillion worth of rental housing—a gap no government could feasibly fill if investors exit the market.
Source: Australian Property Investor