House prices could ‘reshape the Australian dream’ by the end of 2025, says Domain

A picture of a young couple looking at the properties listed in a real estate agency's window display.

Home prices in Australia are forecast to continue rising over the next 12 months and lead to a ‘reshaping’ of how we see the Australian dream, Domain’s chief of research and economics, Dr Nicola Powell told Mozo. 

Powell’s assessment coincides with the release of Domain’s Forecast Report Financial Year 2025, which predicts rising home prices and the tug-of-war between affordability and housing supply will be the main themes of the Australian property market over the next financial year.

The market conditions influencing home prices in Australia currently centre on supply constraints. Domain expects the same story in FY25, with scarcity of land, low building approval rates, high construction costs, and strong migration numbers continuing to fan the flames. 

The average mortgage size in Australia grew 5.39% over the 12 months to March 2024 and now sits at $607,963.

“I do think what we’re seeing is a reshaping of what the Australian dream currently looks like.”

These figures are only likely to increase when, according to Powell, the median home price in five of Australia’s eight capital cities is expected to hit a million dollars by the end of 2025. 

Currently, it’s just three.

“We’re forecasting by the end of the calendar year of 2025, that we’re going to have house prices in Sydney, Melbourne, Brisbane, Adelaide, and Canberra above a million dollars,” says Powell.

“That is a massive milestone in Australia’s housing market to have five of our eight cities above a million bucks.”

For first home buyers in 2024-25, further price growth may reduce their borrowing power and make it tougher to get approved for a home loan

That is, unless they’re willing to reconsider what a first home looks like, says Powell. 

“That first home is much more likely to be a unit – or it’s a house on the periphery of the urban fringe. I do think what we’re seeing is a reshaping of what the Australian dream currently looks like,” she says. 

Where can first home buyers look over the next 12 months? 

Powell says that typically affordable cities like Perth are expected to see stronger rates of growth, while regional cities will be more subdued. 

However, Melbourne appears to be the black sheep of the Australian property market, according to Powell. 

Prices in Melbourne have largely held steady over the past 18 months, and Domain expects that trend to continue. 

“Melbourne is an interesting one because Melbourne’s pretty much flatlined for the past eighteen months and we’re expecting it to continue to flatline over the next twelve months,” says Powell.

“So what that creates is a really stable environment for first home buyers in a city like Melbourne, where prices are pretty much doing nothing.”

As per Domain’s report, Melbourne unit prices will reach as high as $587,000 over FY25, which is vastly more affordable than Sydney’s projected unit price of up to $855,000. 

On the average variable home loan rate of 6.80% p.a.†, mortgage repayments for the Melbourne unit could start around $3,259 per month, while the Sydneysider would be forking out approximately $4,747 per month, based on Mozo’s mortgage repayment calculator

Of course, buying a home can be made that little bit easier when you have the right home loan by your side. 

While the average variable rate is 6.80% p.a.†, one of the lowest variable rates in the Mozo database comes in at nearly almost 1% lower – 5.89% p.a. 

So, make sure you compare home loans to get an idea of which lenders suit your needs and budget while keeping in mind the features you might want to take advantage of. 

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 472 home loans.
Last updated 15 July 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

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  • Discount Great Rate Home Loan

    Owner Occupier, Principal & Interest, LVR<80%, over $150k

    interest rate
    comparison rate
    Initial monthly repayment
    6.19% p.a. variable
    6.21% p.a.

    An easy to use Home Loan with no establishment fee and no monthly or annual fees. Minimum deposit of 20% is required. Mozo Experts Choice Awards - Investor Home Loan Award 2024^.

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  • Low Rate Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.20% p.a.

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

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  • Discounted Home Value Loan

    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.09% p.a.

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).

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†Average variable rate in the Mozo database as at 25 June 2024, for an owner-occupier with <80% LVR, borrowing $400,000 and making principal and interest repayments over 25 years.