By Devayani Sathyan
BENGALURU (Reuters) – Home prices in Australia will rise less quickly this year than previously thought, with only modest support from further interest rate cuts, according to a Reuters poll of property analysts.
A shortage of new homes, together with a stretched price to income ratio after a more than 40% jump in prices over the past five years, is expected to keep many aspiring first-time homeowners out of the market.
The Reserve Bank of Australia cut its cash rate by 25 basis points to 4.10% in February, its first cut in four years, and is expected to cut twice more this year but analysts said such cuts would not ease fundamental affordability pressures.
The February 17-26 Reuters survey of 16 real estate analysts predicted home prices would rise 3.7% this year, less than a November poll forecast, following a 5.0% rise last year and 8.0% in 2023.
Analysts forecast roughly 5% rises in 2026 and 2027.
“You have to be middle-aged and above-average earning to enter the housing market,” said Johnathan McMenamin at Barrenjoey, adding that home ownership in Australia remained “a luxury”
The average asking price of an Australian property was A$814,293 in February, according to CoreLogic, nearly eight times the average annual income and nearly 12 times for a property in Sydney, last averaging $1,193,228.
“In the short-term, borrowing capacity and affordability is a real constraint on how fast house price growth can rebound, even with an RBA easing cycle underway,” McMenamin added.
House prices in the mid-sized capital cities of Brisbane, Adelaide and Perth, which rose 10-20% last year, were expected to climb 5.0-8.0% in 2025. Home prices in Sydney and Melbourne were forecast to rise 3.0%.
Housing affordability and supply are expected to be key issues in Australia’s upcoming election, as both major parties look to address voter concerns over surging property prices, rental shortages, and homeownership challenges.
A Gallup survey found over three-quarters of Australians were dissatisfied with the availability of affordable housing in 2024, ranking second only to Turkey.
Still, when asked about first-time buyer affordability in the coming year, seven respondents expected conditions to improve while three said they would worsen.
“If you compare affordability say a few months before to now, then we actually do expect it to improve for most home buyers in Australia. But…we will still continue to see a gap between price and capacity to pay given how much home prices increased over the past few years,” said My Bui, economist at AMP.
