If purchasing a rental property is on your New Year bucket list, chances are you’re wondering how the market will shape up in 2025. Let’s take a look.

Investors were a driving force in 2024

Last year saw lending to property investors jump 29.5%[1] - and these investors were handsomely rewarded.

By the end of 2024 home values had jumped 14.3% after almost two years of consecutive monthly price growth[2].

Rental yields pushed total returns even higher last year. Across our state/territory capitals, investors pocketed total returns of 8.3% in 2024, a figure that climbed to 10.6% across regional markets[3]. 

Factors that will shape the market in 2025

Looking ahead, 2025 sees many of the same drivers for property price growth that were in place last year:

• A serious shortage of housing nationally
• A tight rental market with a vacancy rate of 1.4% nationally[4], and
• Sluggish new home construction, with building approvals falling 3.6% in November[5]. 

These factors point to an ongoing trend of steadily rising values over time.

A window of opportunity for investors

By late 2024, property prices were cooling in some markets. However, investors who hold out hoping for property prices to fall further could be left disappointed. CoreLogic advises that any downturn in values “is likely to be shallow and short lived”[6].

This is especially the case because interest rates are expected to fall this year, and this could reignite housing demand.

The upshot is that investors may have a narrow window of opportunity to buy today before rate cuts fuel increases in borrowing power, bringing more competition from other buyers to the market. 

Long term gains remain impressive

It’s worth bearing in mind that property tends to deliver its best gains over the long term. As the table below shows, every capital city has recorded significant price growth since the start of the pandemic in 2020.  

Increase in property values since onset of COVID
Sydney 27.7%
Melbourne 8.4%
Brisbane 67.7%
Adelaide 72.1%
Perth 77.0%
Hobart 26.7%
Darwin 24.8%
Canberra 30.3%

Source: CoreLogic[7]
 

It’s clear evidence that time in the market is a more reliable way to make impressive gains on property than delaying a purchase in a bid to save a few thousand dollars on the price of a dwelling. 

Three factors to look for

When you’re ready to invest, it’s worth looking for locations that meet three important criteria:

Proximity to major infrastructure projects, such as new transport links, that often drive local values higher.
Nearby gentrification or new developments that help to attract tenants and home buyers alike. 
Population growth that creates rising demand among tenants and owner occupiers.
The important thing is to talk to your local Raine & Horne property expert, who can explain price trends in the area and identity investment properties that match your goals and budget.  

 
[1] https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release#housing-finance-detailed-
[2] https://www.corelogic.com.au/news-research/news/2025/australias-housing-market-has-just-entered-a-downturn-whats-behind-the-shift
[3] https://www.corelogic.com.au/__data/assets/pdf_file/0022/25456/CoreLogic-HVI-Jan-2025.pdf
[4] https://sqmresearch.com.au/uploads/12_12_24_National_vacancy_rates_November_2024.pdf
[5] https://www.abs.gov.au/media-centre/media-releases/dwelling-approvals-fall-november
[6] https://www.corelogic.com.au/news-research/news/2025/australias-housing-market-has-just-entered-a-downturn-whats-behind-the-shift
[7] https://www.corelogic.com.au/__data/assets/pdf_file/0022/25456/CoreLogic-HVI-Jan-2025.pdf