What we learnt from property in 2025

The RBA eases rates

The biggest news of 2025 undoubtedly came from our central bank. The Reserve Bank of Australia, which dictates monetary policy for the country, is responsible for setting the interest rates at which we all can borrow. The body has been much maligned in recent years for not doing enough for the hard working households of Australia but in 2025, they finally came to the party.

After a long period of tightening, the RBA’s decision to deliver a series of interest rate cuts kicking off mid-year was not only the most significant event of 2025 but a financial catalyst for the activity we saw in the second half of the year. This move immediately eased mortgage serviceability pressures and significantly increased the amount of money new buyers could borrow, injecting fresh demand into the market.

The key lesson: Waiting for lower interest costs might feel safe, but the resulting surge in market competition and prices actually makes any move more expensive. To properly capitalise on market opportunities, the priority should be securing borrowing capacity early to capture capital growth before the supply-demand squeeze drives any target properties out of reach.

Prices Rebound

It was not surprising then to see a rather sluggish market rebound mid-year. With the rate cuts providing a floor for prices, improved credit conditions began a sustained rise in the values of our homes.

Confidence had returned. Not only that, the rally was supercharged by a perfect storm of high demand and critically low housing stock availability. Buyer FOMO had returned. This mid-year momentum effectively set a new price floor, demonstrating that in a supply-starved market, property remains one of the most reliable long-term wealth creation vehicles even before the full effects of the rate cuts are felt.

The subsequent return to growth also proved the market’s resilience and put property back on track, rewarding those early movers who bought in late 2024 or early 2025.

The key lesson: This momentum confirmed that “market timing” is often less effective than “time in the market”. For long-term wealth building, the risk of being priced out by rising values far outweighs the minor savings of waiting for lower interest rates.

The 5% Loan Deposit Scheme

Long speculated, the Federal Government’s Home Guarantee Scheme (the official name for the 5% loan deposit program) came into effect in October of 2025. This decision to turbocharge the borrowing capacity of first home buyers was a significant moment for the property market, effectively turning the dream of home ownership from a marathon to a sprint.

If the rate cuts hadn’t already set the price floor, the sudden influx of ready to go buyers created a rock-solid foundation through overwhelming demand. This sturdy floor helped protect the equity of current homeowners, giving even greater confidence to those ready to unlock the value in their homes.

With supply of new homes almost nonexistent, the effect on the market was noticeable. First homebuyers, invigorated by access to the scheme flooded the sub-$1 million market, pushing up prices. Not only had the floor been set, it was now rising, creating a wealth effect for investors to draw on increased equity. The knock on effect of extreme competition at the entry-level drove many unsuccessful buyers back into the rental market, keeping vacancy rates near historic lows of 1.5%.

The key lesson: Entry level has a new definition, with so many new buyers competing for the same properties. Yields will now be challenged in the lower end of the market and starting prices being much higher. To build wealth for the long term, it will be key to make a strategic trade-off between rapid capital growth and increasingly compressed rental yields.

As we reflect on these key events, a few things become clear. The year was defined by a shift from affordability stress to confidence-driven growth, underpinned by key structural changes which created significant structural imbalance.

Things can change quickly and it is the most prepared who will be best placed to take advantage. As we have seen, time and time again, property remains one of the most reliable vehicles for building long-term wealth that exists today.