What is driving the Aussie property surge in 2025?

Foreign interest, policy reform, and rental demand push Melbourne to the forefront

The housing market in Australia continues to break records and draw global interest as it heads deeper into 2025. National dwelling prices have reached historic highs, driven by growing investor confidence, policy momentum, and renewed international engagement—despite stubborn supply challenges. 

According to Elite Agent, the national mean dwelling price surpassed AUD1 million (USD670,000) for the first time in January 2025. Markets such as Melbourne, Sydney, and Brisbane are seeing especially strong activity, buoyed by continued demand and the promise of further interest rate cuts. 

Melbourne market set to thrive 

“Melbourne’s housing market is set to remain buoyant in 2025,” said Benson Zhou, Director – Hotels, CBD and Metropolitan Sales, State Head – Asia Markets at Savills Australia, and member of the Judging Panel of the PropertyGuru Asia Property Awards (Australia). “A range of economic and policy factors [are] reinforcing demand despite ongoing supply constraints.” 

Zhou noted that a key trend this year is the return of international interest. As inbound travel recovers and the Australian dollar remains relatively weak, overseas buyers are looking to Melbourne as a long-term investment destination. “A softer currency makes local real estate more attractive to overseas investors and expatriates, especially those seeking stable, long-term assets in a globally recognised city,” he explained. 

Policy tailwinds and supply pressures 

While borrowing conditions are improving due to anticipated rate reductions, challenges remain. High construction costs and labour shortages are delaying project completions, keeping supply limited even as demand rises. 

Realestate.com.au reported that South Australia has passed innovative planning reforms aimed at easing the housing crisis nationwide. These laws introduce fast-tracked approvals for developments in key urban corridors and promote medium- to high-density housing near public transport nodes—measures designed to boost supply where demand is strongest. 

Meanwhile, in Victoria, officials are also pushing for streamlined approvals and greater density around transit hubs. As Zhou noted: “The Victorian Government’s recent planning reforms—focused on streamlining approvals and encouraging density around transport hubs—are a step in the right direction, but their impact will take time to materialise.” 

“In the short term, this means the imbalance between demand and supply is likely to persist, further supporting price growth,” he added. 

Buyers focus on education and lifestyle precincts 

International buyers are particularly drawn to new apartments and townhouses near universities and lifestyle centres. “Offshore buyers, in particular, may target new apartments and townhouses in key education and lifestyle precincts, boosting activity in areas close to universities and the CBD,” Zhou shared. 

The Australian rental market remains tight, offering compelling yields for investors. This, combined with increased purchasing power from lowered interest rates, is expected to lift both domestic and international investor activity. 

Australian Property Update reported that the market is positioned for heightened activity this year, citing easing borrowing conditions and strong demand fundamentals. 

Housing pressures in Western Australia 

“Here in Western Australia, the housing crisis has only intensified in the past two years,” said Lui Violanti, Regional Manager – Western Australia, Inhabit Group and Vice Chairperson of the PropertyGuru Asia Property Awards (Australia) Judging Panel. “Last week, the government media announced that the population of Western Australia has increased 2.4 percent and officially tipped over three million people, with the state having the fastest growth rate of anywhere in the country last year.” 

“The Bankwest Curtin Economics Centre found 210,000 West Australian households now believed their housing to be unaffordable, an increase of 91 per cent since 2023,” he added. 

Violanti cited the Housing Affordability in Western Australia 2025 report, which revealed the state’s housing market is under intense pressure from rapid population growth, slow housing supply, soaring rents and construction delays. “With 119,000 new residents since 2023, demand for housing had surged way past supply.” 

“WA recorded a shortfall of 4,000 new homes despite more than 20,000 homes being completed last year, the most since 2017,” he noted. “Building times in Western Australia were the highest in the country, taking more than 15 months to complete a house, adding AUD100,000 to the price of a new home.” 

He also highlighted that a growing discrepancy between key worker wages and housing costs meant most single-income workers such as nurses, police officers, and firefighters were priced out of home ownership in many parts of Perth. 

“Rentals were also in short supply with a lack of 7,700 homes, pushing rents up 76 percent in the past five years and tenants out to the fringes of the metro area adding stress, complexity, and extra costs to their lives.” 

Violanti further emphasised, “Persistent shortfalls in housing and chronic underinvestment in social housing had strained support services and exposed failures in WA’s housing system.” 

“The delivery of social and affordable housing is a significant policy issue for the State and Commonwealth Governments. A lack of appropriate housing is resulting in more people seeking the safety net of public housing, meaning the State’s public housing waitlist is growing faster than the delivery of business-as-usual social housing can maintain.” 

He noted that WA’s State budget has allocated funding for 13 social housing projects, earmarked to be “built to rent” developments. 

Australia shines on the regional stage 

As Australia’s property market enters a new phase of global competitiveness, its developers and projects are earning recognition across the region. 

At the 19th PropertyGuru Asia Property Awards Grand Final 2024, Australian entries secured multiple accolades among peers from 15 markets across Asia and the Middle East: 

• Best Investment Condo Development (Asia): Elements at Carousel by Jean Yip Developments 
• Best Luxury Townhouse Development (Asia): Mercer by BHC Property 
• Best Townhouse Development (Asia): Chatswood Garden by FY Property, Kooringa Group, MA Financial, CPDM 
• Best Integrated Work From Home Development (Asia): BLVD by OSK Property 
• Best Wellness Residential Development (Asia): BLVD by OSK Property 
• Best Condo Interior Design (Asia): BLVD by OSK Property 

These accolades not only reflect architectural excellence and lifestyle-driven design but also reinforce Australia’s role in shaping the future of urban living across the region. 

Looking ahead: A strong year for growth 

In conclusion, 2025 is shaping up to be a strong year for Australian real estate. “[In Melbourne], demand will likely intensify, supported by interest rate policy, currency dynamics, and renewed international engagement—while supply constraints continue to apply upward pressure on prices,” Zhou said. 

Violanti added, “Persistent shortfalls in housing and chronic underinvestment in social housing had strained support services and exposed failures in Western Australia’s housing system.” 

He emphasised the need for continued efforts in both the private and public sectors to address affordability and access. “The State’s target to deliver nearly 5,000 new social homes and intent to increase the availability of affordable housing to help fill a recognised gap in the housing continuum, and towards the Commonwealth’s national target to support delivery of 40,000 new homes.” 

A forward-looking perspective 

Australia’s property landscape in 2025 underscores a tale of two dynamics—opportunity and urgency. While demand remains robust across major cities like Melbourne and Perth, supply-side hurdles, affordability constraints, and housing equity remain pressing challenges. 

As developers gain regional acclaim and cities attract global investors, the need for coordinated planning, inclusive housing strategies, and sustainable growth has never been more apparent. The next chapter of Australia’s real estate story will be defined by how well it balances prosperity with accessibility for all. 

Know any award-worthy residential, commercial, or industrial projects in the country? Nominate them for the 8th annual PropertyGuru Asia Property Awards (Australia) on or before 18 July 2025. To know more, visit AsiaPropertyAwards.com/Award/Australia/.

Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].