Predicted interest rate cuts, low supply and other economic factors will continue to have a big impact on the property market in 2025, according to Mortgage Choice. It has revealed the seven key influences that will shape how the market performs throughout the year.

Inflation: Underlying inflation remains too high, which increases household costs, which can lead to interest rates remaining higher for longer, reducing buyer borrowing capacity.

Interest rates: Many expected interest rate cuts in late 2024, but that did not occur. Some are predicting three cuts in 2025, starting in April.

Labour market: The labour market remains strong, with positive job creation, high employment participation and an unemployment rate of 3.9%. For inflation to reach its target, the unemployment rate will need to rise to 4.5%. There is no sign of that happening soon.

Population growth and migration: Population growth has slowed slightly but remains well above the long-term average of 1.4%. This boosts demand for housing, pushing up prices.

Mortgage lending: Lending continues to rise, which is driving housing demand and pushing prices up.

Construction costs: Material costs increased by 1.4% in the year to September 2024 and are 34.3% higher than at the start of the pandemic. While the pace of growth is slowing, costs are unlikely to drop, leading to higher housing costs.

Supply: The Federal Government’s Housing Accord aims to build 1.2 million new homes by 2028–29. Dwelling approvals have increased but remain far below the level needed to meet the annual target.