Australia's Property Market Poised for More Buyer Activity, Says NAB

The Australian property market is showing renewed vigor, with buyer activity surging to push prices to record highs in early 2025, according to the National Australia Bank’s (NAB) latest housing update. A cocktail of falling interest rates, stubbornly low supply, and strategic investor activity has reignited demand, even as affordability challenges linger. Yet the rebound is uneven, with some cities and neighborhoods outperforming others, and first-home buyers navigating a steep path to entry.

The Catalyst: Rate Cuts and Rising Confidence
The February 2025 interest rate cut marked a pivotal shift, easing mortgage pressures and reigniting buyer enthusiasm. NAB forecasts up to five further rate reductions starting in May 2025, which could boost borrowing capacity by 8–10%, according to their serviceability models. This optimism is already visible: CoreLogic’s national home value index rose 0.4% in March, its second consecutive monthly gain, reversing a brief dip earlier in the year.

The demand-supply imbalance remains a key driver. Building approvals remain mired at 20-year lows, with population growth outpacing construction in cities like Brisbane and Perth. This has fueled a seller’s market, where limited listings in desirable areas drive bidding wars. “Buyers are increasingly focused on locations with ‘20-minute neighborhoods’—places where amenities, jobs, and transport are within easy reach,” says NAB economist Taylor Simpson.

Regional Winners and Losers
The rebound isn’t uniform. Brisbane and Perth are leading the charge, fueled by affordability and migration.
- Perth leads with projected 10% annual growth, driven by low supply and strong population inflows.
- Brisbane is expected to grow 6.5%, benefiting from its status as Australia’s “new capital” for tech and talent.
- Sydney and Melbourne, while recovering, remain 1.4% and 5.6% below their 2022 peaks, respectively, as buyers await further rate cuts to ease affordability strains.

Regional markets are also heating up, with values 7% higher in August 2024 compared to the prior year. However, affordability barriers—such as a 9.7-year median wage savings period for a 20% deposit—mean these areas are attracting investors rather than first-home buyers.

The Buyer Landscape: Investors Outpace First-Timers
Strategic investors are the unsung heroes of this market. They’re snapping up units in gentrifying suburbs and family-friendly apartments, betting on long-term capital growth. Meanwhile, first-home buyers face an uphill battle: 38% of migrants still rent after five years, and stagnant wage growth has left many dependent on parental support or inheritance.

Downsizers and wealthy buyers are also playing a role, with a third of 2024 transactions occurring without mortgages—a trend fueled by equity-rich homeowners.

Headwinds and Caution Flags
Despite the optimism, risks loom. Fragile consumer confidence—driven by inflation fears and cautious employment growth—could derail momentum. The Reserve Bank of Australia’s (RBA) reluctance to cut rates aggressively, alongside APRA’s strict mortgage serviceability rules, may limit the rebound.

The market’s fragmentation is another concern. Inner suburbs with walkable amenities thrive, while outer suburbs struggle. “Buyers are prioritizing livability over space,” says Simpson, noting that the gap between house and unit prices is narrowing as investors target affordable entry points.

The Outlook: A Selective Boom
NAB forecasts 5.4% national growth in capital city housing values this year, led by Perth and Brisbane. The bank emphasizes that location-specific analysis is critical—gentrifying areas, “20-minute neighborhoods,” and cities with strong job markets will outperform.

Investors and buyers should also monitor policy shifts. If APRA relaxes its 3% interest rate buffer for mortgage approvals, borrowing capacity could jump 15%, supercharging demand. Conversely, if inflation or employment stumbles, the market could stall again.

Conclusion: A Market of Two Halves
Australia’s property market is on the cusp of a selective boom, driven by strategic buyers and cities like Perth and Brisbane. Investors targeting well-located units or family-friendly suburbs stand to gain, while first-home buyers face a prolonged affordability squeeze. With NAB’s rate cuts and supply constraints acting as tailwinds, the market’s recovery hinges on whether policy adjustments can bridge the gap between demand and stagnant wage growth. For now, the message is clear: location, not just price, will define success in this uneven rebound.