The market’s performance in early 2025 is not a fleeting anomaly but rather a reflection of a sustained trend that leading industry experts expect to continue. A strong consensus among major economic forecasters indicates that the same fundamental pressures driving prices today will persist, leading to further growth through 2025 and an acceleration into 2026. This forward-looking analysis is a crucial tool for brokers, providing an evidence-based counter-narrative to client fears of an imminent market crash.

Two of the market’s most respected forecasting bodies, KPMG and Domain, project a period of continued, moderate price appreciation. KPMG’s property outlook anticipates national house prices will rise by 3.3% over the course of 2025, with growth expected to nearly double to a more robust 6.0% in 2026.[5, 6, 7] Domain’s forecasts align with this positive sentiment, predicting average house price growth across the combined capitals of between 4-6% in 2025, with momentum carrying forward to deliver approximately 6.0% growth by mid-2026.[8, 9]

While these forecasts cite multiple contributing factors—including anticipated interest rate cuts, strong population growth, and government support for first-home buyers—a critical examination reveals a single, non-negotiable common denominator: a chronic and constrained housing supply. Interest rates can fluctuate, and migration patterns can shift, but the structural deficit of homes in Australia is a long-term reality that provides a powerful and persistent baseline of support for property values. The unanimity on this point is telling. It suggests that while factors like monetary policy may influence the rate of price growth, it is the fundamental supply-side pressure that dictates the market’s underlying direction. This distinction is vital for client conversations, as it demonstrates that even if rate cuts are delayed or smaller than anticipated, the primary force supporting the market remains firmly in place.

To truly understand the market’s trajectory, one must look past the short-term noise of interest rate speculation and focus on the foundational issue. The National Housing Supply and Affordability Council (NHSAC) minced no words in its landmark State of the Housing System 2025 report, framing the situation as a “housing crisis… decades in the making”.[12, 13] This is not a cyclical downturn or a temporary market imbalance; it is a deep, structural problem born from a persistent failure to build enough homes to meet the nation’s needs.

The National Housing Accord – An Ambitious Target Meets a Harsh Reality

The Federal Government’s flagship policy response to this crisis is the National Housing Accord. Launched in 2022, it represents an ambitious pact between all levels of government and the private sector with a headline goal of delivering 1.2 million new, well-located homes over the five years from July 2024 to June 2029.[14, 15] The target was designed to be aspirational, galvanising industry and government towards a common objective.

However, ambition is now colliding with the harsh reality of on-the-ground delivery constraints. The NHSAC’s 2025 report provides a sobering forecast, projecting that Australia is on track to build only 938,000 new homes during the Accord’s five-year timeframe.[16] This leaves a staggering shortfall of 262,000 dwellings against the official target.[16] This gap alone is enough to ensure that supply remains incredibly tight, but a deeper analysis of the numbers reveals an even more alarming situation.

The Critical Net Supply Deficit – Why the Hole Is Getting Deeper

The 262,000-home shortfall against the government’s target is only part of the story. The more critical metric for understanding future price pressure is the net change in housing supply relative to new demand. The NHSAC report provides the necessary data for this calculation [16]:

This dynamic transforms the common metaphor of a supply “floor” supporting prices. A static floor implies a baseline that prevents a crash. The current situation is more akin to an upward-sloping escalator. Because the fundamental supply-demand imbalance is compounding each year, the baseline equilibrium price required to clear the market is being structurally driven higher over time. For clients adopting a “wait and see” strategy, this means the entry point to the market is actively moving further away from them, making waiting a demonstrably costly decision over the medium term.

The Construction Bottleneck – The Disconnect Between Policy and Productivity

Translating these complex macroeconomic realities into clear, actionable advice is the core function of a professional broker. The evidence of a deep and worsening structural supply crisis provides a powerful framework for guiding client decisions and managing expectations in the current market.

Reframing the Client Conversation: From Market Timing to Personal Timing

The most significant implication of this analysis is that the strategy of “waiting for prices to fall” is structurally flawed. The powerful, upward pressure created by the housing deficit provides a formidable floor under property values, making a significant market-wide crash highly improbable. This empowers brokers to confidently pivot client conversations away from the futile exercise of market timing and towards the far more productive assessment of personal timing.

The dialogue should shift from speculating on uncontrollable macroeconomic events like RBA decisions to focusing on the controllable factors of a client’s personal financial situation. The key questions are not “When will the market peak?” or “When will rates fall?” but rather, “Is your deposit ready?”, “Is your income secure and your serviceability strong?”, and “Does this purchase align with your long-term financial goals?”. When a client is financially ready, the long-term fundamentals of the Australian property market provide a strong basis for acting with confidence.

The Shifting Demand Landscape and The Rise of the Unit

The intense affordability pressure created by the supply crisis is causing a structural evolution in market demand. With the median house price in cities like Sydney and Melbourne pushing well beyond the reach of average households [1, 20], buyers are increasingly being channelled into the more affordable unit market. This is not merely a lifestyle preference but, for many, a forced adaptation to the economic reality of the housing shortage.

This structural shift is now being reflected in expert forecasts. Forecasters like KPMG predict that unit price growth will modestly outpace house price growth over the next two years, driven by this affordability-led demand.[5, 7, 21] This has significant implications for client advice. For many first-home buyers and investors, the “Great Australian Dream” of a detached house with a backyard may need to be reframed. High-quality, well-located apartments and townhouses are no longer a secondary option but a primary and strategically sound pathway to property ownership and wealth creation in the current environment. Advising clients on this evolving landscape is crucial for managing expectations and identifying viable opportunities.

Key Talking Points for Client Meetings