Australian Economy & Residential Property Brief - Q3 2025

Australian Economic & Property Update (2025)

As we reach the midpoint of the year, it’s a good time to review what the Australian government and experts are saying about the economy and property market. Below is a mid-year update, along with insights on leveraging this information – and some tips to stay connected with us for more updates.

Economic Snapshot – Inflation, Interest Rates & Jobs

• Inflation easing: After a surge in 2022–23, inflation has fallen back into the RBA’s 2–3% target range . This cooling of price pressures is good news – it indicates the cost of living increases are stabilizing.

• Interest rates pivot down: With inflation moderating, the Reserve Bank of Australia (RBA) has begun cutting the cash rate after aggressive hikes last year. In fact, February 2025 saw the first rate cut since 2020, bringing the cash rate to 4.10% . Further 0.25% cuts followed in May and August. The big banks predict more relief ahead – for example, Commonwealth Bank forecasts the cash rate could drop to about 3.35% by December 2025 (down from a 4.35% peak in 2023) . Lower rates reduce borrowing costs and can increase borrowers’ capacity, though the RBA has signaled it will move cautiously and remain “data-dependent”  to keep inflation on track.

• Steady employment: The job market remains resilient. Unemployment is holding around 4.1% – roughly where it’s been for over a year  – and wages are gradually rising . Solid employment and income growth have helped support consumer confidence even as overall growth has been modest. (Australia’s GDP grew about 1.3% year-on-year in the March quarter of 2025 , reflecting a slower but steady economy.)

What does this mean? In short, economic conditions are improving for consumers: inflation is under control and interest rates are finally coming down. This creates a window of opportunity for homebuyers – as detailed below, home loan rates are likely to ease over the coming months, which can improve affordability. However, the RBA’s cautious stance means rate cuts will be gradual, not a freefall. We should plan on interest rates remaining higher than the ultra-low levels of 2020–21, but slightly lower than last year’s peak. Now let’s look at the property market and housing plans in this context.

Housing Market & Government Initiatives

Government support for buyers: The federal government has rolled out new measures to assist homebuyers. Notably, the First Home Buyer Guarantee scheme is being expanded – and moved up to start in October 2025 (three months earlier than planned) . This scheme will allow eligible first-home buyers to purchase with only 5% deposit (with no LMI), a game-changer for those with limited savings . In addition, the usual income eligibility limits are being removed, and purchase price caps are being raised significantly in major cities (e.g. Sydney’s cap will increase from $900k to $1.5 million) . The Housing Minister, Clare O’Neil, says this will help Australians “pay down their own mortgage rather than rent” sooner . However, experts caution these moves are a double-edged sword: by boosting buyer demand, the scheme could push property prices higher than the government’s own projections. (Treasury estimated it would add only ~0.5% to house prices over six years, but some economists predict a larger impact – potentially ~3% extra growth , or even more in the short term.) In other words, the boost in buyer demand may increase competition for homes, benefiting sellers as well as first-home buyers.

Tackling the housing supply crunch: Recognising the severe housing shortage and affordability crisis, the government is also focused on increasing the supply of new homes. After a national economic roundtable in August, a “housing speed-up” plan was announced. This includes a 7-year pause on new building code regulations (through 2029) to cut red tape and give builders “room to breathe” in constructing homes  . Moreover, the government will fast-track environmental approvals for housing projects – a dedicated team (using AI tools) will expedite assessments for over 26,000 new homes in the pipeline . These steps aim to help achieve an ambitious target of 1.2 million new homes by 2030  (up from the previous 1 million target). Industry leaders have welcomed the moves; the Property Council of Australia called the plan a “win-win roadmap to better housing supply” that could unlock tens of thousands of homes . Despite these efforts, challenges remain: a recent State of the Housing System report warned that even under optimistic scenarios, housing construction is likely to fall short of the 1.2M target – with only ~938,000 dwellings projected by 2030 . In 2024, just 177,000 new homes were built nationally, far below the ~223,000 needed to meet demand . This supply shortfall means competition for existing homes will likely stay fierce until construction catches up.

Market trends and predictions: The property market is showing signs of renewed growth in 2025, largely thanks to the interest rate relief. National home values have risen roughly 3% since the start of the year , reversing some of last year’s slowdown. Buyer confidence is coming back: banks report a surge in home loan pre-approvals (up 12% this year) after the initial rate cuts , and real estate agents are seeing more bidders at auctions as compared to late 2024. Housing analysts forecast moderate price growth ahead rather than a boom. KPMG, for example, projects Australian house prices will increase about 3.3% in 2025 and 6.0% in 2026 , with unit/apartment prices climbing even faster (as buyers seek more affordable options). In essence, prices are expected to keep rising, but at a sustainable pace. Many economists believe the combination of constrained supply and revived demand will buoy the market, yet not to the runaway “boom” levels seen in the past  given that borrowing costs are still relatively high and affordability remains stretched for many buyers.

What It Means for Homebuyers

How do these developments affect you as a homebuyer or homeowner? Here are a few key takeaways and tips:

• You may be able to buy with a smaller deposit: If saving a 20% deposit has been a barrier, the expanded First Home Buyer Guarantee and similar programs can dramatically lower the upfront savings needed. Buying with just 5% down (and no lenders’ mortgage insurance) is now a reality for many first-home buyers . This could let you purchase years sooner instead of paying rent. However, be mindful: a smaller deposit means a larger loan and higher repayments than you’d have with a big deposit. It’s important to budget for those mortgage payments and ensure they’re comfortable long-term. (On the plus side, if you’re currently renting, your mortgage payment may be comparable to your rent – with the benefit that you’re building equity in your own home!)

• Expect competition to heat up: Falling interest rates and new buyer incentives are bringing more house-hunters into the market. We’re already seeing an uptick in buyer activity – for example, mortgage pre-approval applications jumped ~12% this year after the RBA’s initial rate cut . This means more competition for the limited homes on the market. As demand increases, it’s likely home prices will keep nudging up . If you’re in a position to buy now, acting sooner could help you get in before further price rises. Make sure you have your finances in order (deposit ready and loan pre-approval in place) so you can move quickly when you find the right property.

• Lower rates boost your borrowing power: The recent and expected RBA rate cuts will filter through to lower mortgage interest rates. Not only can this reduce monthly repayment costs – it also increases how much banks might lend you for a given income level. In other words, your borrowing capacity may improve as rates come down . This could put some properties that were previously just out of reach back within your budget. It’s a good time to review your loan options or speak with a mortgage broker to understand what you can afford now. Just remember to stress-test your budget: even if you can borrow more, ensure you’d be comfortable if interest rates were to rise a bit in the future (or if your situation changes).

• Leverage expert guidance and support: With so many changes – interest rates, government schemes, and market dynamics – navigating the home-buying journey can feel overwhelming. This is where our support comes in. Homeowner Assist specializes in helping aspiring buyers (including those without large deposits) find a path to home ownership. We can identify which grants or guarantee programs you qualify for, explore low-deposit loan options, and guide you through finance and purchase steps. Getting expert advice can give you a serious advantage and peace of mind in this competitive market. Don’t hesitate to lean on professionals who understand the process inside-out.

At Homeowner Assist, our mission is to support hardworking Australians in their journey toward owning a home – even if you don’t have a big deposit. We’re here to help you make sense of these market changes and seize opportunities that fit your situation.

👉 Find out if you qualify: Ready to take the next step? Take our quick Home Buyer Quiz to see what programs or loan options you may qualify for. In just a minute, you’ll get an idea of your eligibility for low-deposit home loans, government assistance, or other solutions. (Tip: Many people are surprised to learn they can get into the market with far less deposit than they thought!)

Stay Connected for Updates & Tips

The property landscape is always evolving. Follow us on Facebook and Instagram for regular updates, homebuyer tips, and the latest news impacting the market . We share valuable content – from interest rate news to clever saving hacks – to help you stay informed and inspired on your journey to home ownership. Don’t miss out on the info and opportunities that could make a difference for you or your family.

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Thank you for reading our mid-year report! We hope you found these insights helpful. If you have any questions or want personalised guidance, simply hit reply or reach out to our team. We’re always here to assist you.

Happy house hunting! 🏠