What Are the Pre-Conditions for the Next Property Boom? - Jan 2025

By Rich Harvey, CEO & Founder, propertybuyer.com.au

For decades, the New South Wales Central Coast region was in a property market holding pattern. It was flying under the radar of homebuyers and investors alike. But COVID’s significant upheaval brought the region into the limelight. Now, a raft of drivers across the political and economic spectrum will deliver exciting times to the Central Coast – and those who own property will be among the biggest beneficiaries.
Anthony Knight, Principal buyers’ advocate for Propertybuyer on the Central Coast, has lived in the region for decades. We recently chatted about the region and why he’s excited about what’s to come.

Introduction

Some property commentators are predicting that Australia is on the brink of another property boom in the coming years. With the media often reducing complex market dynamics to catchy soundbites, how can investors and homeowners separate fact from fiction? By understanding the fundamental pre-conditions for a property boom, you can make more informed decisions in an evolving market landscape. I recently interviewed Louis Christopher, experienced and accurate forecaster and Managing Director of SQM Research, to get his insights.

Defining a Property Boom

A property boom is generally characterized by a rapid and sustained increase in property values and sales activity. While definitions may vary, a common benchmark includes annual dwelling price growth exceeding 10% and a 20–30% surge in sales turnover above long-term averages. Historically, such periods are marked by significant economic and demographic shifts that drive demand to unprecedented levels.

Reflecting on Recent Booms

The last major national property boom occurred between September 2020 and March 2022. During this period, average national dwelling prices soared by 32%, fuelled by record-low interest rates, government incentives, and a pandemic-induced shift in housing preferences. This boom demonstrated how economic policy and external shocks can create fertile ground for rapid price growth.

Key Pre-Conditions for the Next Boom

1. Interest Rate Cuts

Interest rates are a pivotal driver of housing affordability and market sentiment. According to Louis Christopher’s analysis, a cut of at least 50 basis points could significantly stimulate buyer demand. With inflationary pressures easing and the Reserve Bank potentially pivoting toward rate cuts by early to mid-2025, this factor could set the stage for renewed market activity.

2. Supply Constraints

Australia is currently grappling with a severe shortage of housing stock. In 2024, dwelling completions lagged behind population growth by over 32,000 homes. As construction costs remain high and new developments slow, the imbalance between supply and demand is likely to intensify, creating upward pressure on prices.

3. Population Growth

Post-pandemic migration has driven Australia’s population growth to record levels, with over 500,000 people added annually. Strong population growth underpins housing demand, particularly in urban and regional hotspots. However, this trend could also exacerbate rental market pressures, as supply struggles to catch up.

4. Economic Stability and Employment Growth

Employment growth contributes to consumer confidence and borrowing capacity, two critical factors for housing demand. With Australia’s employment market expected to

expand moderately in 2025, the resulting economic stability could further support housing market growth.

5. Consumer Sentiment

While consumer sentiment has been subdued in recent years, any improvement—potentially triggered by rate cuts or broader economic optimism—could reignite buying activity. Early signs of recovery in buyer confidence suggest that sentiment may play a significant role in the next property boom. I am already seeing consumer sentiment rising on the back of expected interest rate cuts and this is showing up in the Westpac-Melbourne Institute survey of sentiment which has risen from a low of 80 points to around 92 points.

Lessons from History: Post-WWII Housing Boom

The post-World War II era offers a historical parallel to current conditions. Housing prices nationwide between the Great Depression and WW2 were mostly in a downturn over that time. Home ownership rates were also at a very low ebb with less than 50% of the adult population owning a home. Post WW2 there was a population boom and a renewed confidence in the economy. Over and above that, the Federal government of the day (along with state governments) generated a construction boom which further boosted the economy and home ownership rates skyrocketed to 70%+.

Challenges and Risks

While the outlook is optimistic, potential challenges remain. A prolonged delay in rate cuts or a global economic slowdown could temper market recovery. Additionally, geopolitical uncertainties and fluctuating commodity prices may impact Australia’s economic landscape.

How to Prepare as an Investor or Homeowner

Timing the market is notoriously difficult, even for seasoned professionals. However, prudent investors can position themselves by:

• Conducting Market Research: Identify regions with strong fundamentals, such as population growth and infrastructure investment.
• Securing Pre-Approval: With borrowing conditions set to tighten, securing financing early could be advantageous.
• Adopting a Long-Term View: Booms and busts are cyclical; investing with a long-term perspective can mitigate short-term volatility.

The Road Ahead – The Next Boom is coming!

The ingredients for the next property boom are gradually aligning, with rate cuts, supply shortages, and robust population growth at the forefront. While uncertainties remain, understanding these pre-conditions can allow you as an investors or homeowners to navigate the market with confidence. As always, preparation and adaptability are key to leveraging opportunities in Australia’s dynamic property market.

If you’d like help finding your next property, or working out where to buy, negotiating with agents, researching and navigating the changing property market ….then please reach out. Call Propertybuyer today on 1300 655 615 or email info@propertybuyer.com.au or use this link to send your enquiry today.

 To have one of our friendly Buyers' Advocate's contact you, click here to:

   or

call us on 1300 655 615 today.