Light shines on Australian property market
March 2025
The tide has turned, and a new wave of confidence is sweeping through the Australian property market in 2025. With the first interest rate cut in more than four years and the Australian dollar falling below US$0.65, both domestic and international buyers are re-engaging, and sellers are optimistic about achieving strong results.
According to Kay & Burton Managing Director Ross Savas, the market has entered 2025 with renewed momentum.
“There’s a new spring in people’s step which started early January,” he said. “People are more confident now that interest rates are on the way down—there’s finally light at the end of the tunnel. And while it may not have a profound impact on purchasers at the top end of the market, it certainly boosts sentiment across all price points.”
According to a recent industry study by CoreLogic, 65 per cent of Australia’s leading real estate professionals predict house prices will rise in 2025, buoyed by multiple economic factors. CoreLogic’s Eliza Owen said economic recovery in late 2024 set the foundation for increased buyer activity in the year ahead.
“Improving household savings and easing interest rates are expected to drive demand later in 2025, even as supply challenges persist,” she said, adding that Melbourne has all the economic indicators of a market in motion.
“Melbourne has established an affordability advantage and could experience improved capital growth performance in 2025, driven by lower interest rates, higher real incomes, and better affordability,” Ms Owen said.
Other experts are also supporting this sentiment, tipping Melbourne’s property market is likely to become a million-dollar city within two to three years. Advisory firm KPMG has forecast house prices in the Victorian capital to increase 3.5 per cent in 2025, with a predicted 6 per cent boost in 2026. Based on PropTrack’s 2024 12-month median of $895,000 for Melbourne houses, and the estimated two-year uptick, more than $87,000 would be added to the typical house price in the next 24 months, bringing the median close to the magic $1 million mark.
As 2024 gave way to 2025, Mr Savas said a new chapter had begun, with record-breaking luxury sales already setting the tone for the year.
“We’ve had some extraordinary results, and there’s more to come. Buyers who were hesitant in late 2024 are now making bold moves,” he said.
While global politics continue to dominate headlines, Australia remains a safe haven for international buyers seeking stability, lifestyle, and value.
“We’re in a very good part of the world—no geopolitical issues, strong economic fundamentals, and an incredible lifestyle to offer,” Mr Savas said.
A market primed for international buyers
With the Australian dollar at a multi-year low, international buyers see an opportunity to secure high-end properties at a relative discount.
Kay & Burton Partner and Head of International, Jamie Mi, said the currency shift is a powerful motivator.
“If we look at where the Australian dollar is sitting against the US dollar, it means international buyers are effectively purchasing assets at a 10 to 15 per cent discount compared to a few years ago,” she said.
Even in typically quieter months, interest from international buyers has remained strong.
“Right up to December, we were receiving competitive offers from overseas buyers—at a time when the market usually slows. We’re seeing serious buyers pushing for short settlements, competing with local buyers who often require longer lead times,” Ms Mi explained.
International families continue to target prestige suburbs such as Kew, Canterbury, Hawthorn, and Hawthorn East, with a growing interest in Brighton due to the increased intake of international students at Brighton Grammar.
“For many buyers, school zones drive their decision-making,” Ms Mi said.
While the appetite for Australian real estate remains strong, foreign buyers are also weighing the impact of Victorian land tax changes and new federal restrictions on temporary residents purchasing existing homes.
“Some high-net-worth clients have shown strong interest in the Mornington Peninsula, but they are sensitive to land tax implications,” Ms Mi said. “The Albanese government’s decision to bar temporary residents from buying established homes for two years is also a factor, though its impact will likely be limited for the prestige market. If you look at the Foreign Investment Review Board (FIRB) approvals last year, approximately 0.5 per cent of FIRB applications were approved so it’s not a significant portion of the market.”
Against this backdrop, Kay & Burton continues to dominate the prestige market, consistently leading sales in Melbourne’s most sought-after suburbs. In 2024, our Stonnington, Boroondara, and Bayside offices secured 39 per cent of sales above $7 million, with the nearest competitor at 23 per cent*. In the ultra-prestige sector—sales above $10 million—Kay & Burton commanded an unmatched 58 per cent share, with the next closest agency at 18 per cent.*
“The sweet spot for international buyers this year will be anywhere between $15 million and $35 million,” Ms Mi said. “These buyers are upping their game.”
With strong demand, a favourable exchange rate, and increasing market confidence, 2025 is shaping up to be a defining year for Australia’s luxury property sector. The stage is set for high-profile transactions and sustained global interest in Australian real estate.
*Data sourced from realestate.com.au sold listings and Kay & Burton CRM
Kay & Burton Partner and Head of International, Jamie Mi