With further interest rate cuts on the horizon for 2025 and stable property pricing, especially in Sydney, is now the right time to buy?
Deciding whether now is a good time to buy property depends on your financial situation, goals, and risk tolerance, as the market in 2025 presents both opportunities and challenges. Below is a detailed analysis based on current trends and forecasts for Sydney’s property market, with key factors to consider:
1. Interest Rate Cuts Boosting Demand
- The Reserve Bank of Australia (RBA) cut interest rates in February 2025 and May 2025 to a cash rate of 3.85% and potentially further rate cuts later in the year. Lower rates improve borrowing capacity and buyer sentiment which could drive prices higher later in the year. Buying now might allow you to enter the market before prices rise further.
- Auction attendance rates so far for 2025 has been renewed with double the bidders and luxury properties exceeding reserves which suggests the market is gaining momentum. According to realestate.com.au, auction clearance rates for June 2025 are around 69%, up from 67% in March 2025.
2. Strong Long-Term Fundamentals
- Sydney’s population is projected to grow significantly, with over 650,000 new residents expected by 2034, driven by migration and urban appeal. This fuels long-term housing demand, particularly in inner and middle-ring suburbs such as Castle Hill, Kellyville, Baulkham Hills, Ashfield and Padstow. Lakemba, Minto and Rooty Hill also offer some more affordable choices to enter the market.
- Sydney remains one of Australia’s most resilient property markets, with forecasts suggesting house prices could rise 3.3-6% and unit prices 4-6% in 2025, potentially climbing 16% for houses and 23% for units by 2028.
3. Opportunities for First Time Buyers
- Government incentives like the First Home Buyers Assistance Scheme, First Home Owner (New Home) Grant and the Help to Buy scheme (passed in late 2024) are designed to ease affordability for first time buyers, making 2025 a potentially favorable year to enter the market.
- More affordable suburbs such as Condell Park and Wiley Park have shown strong growth offering entry points below the median house price.
4. Rental Market Strength for Investors
- Sydney’s rental market is extremely tight, with vacancy rates at 1.7% (below the balanced market range of 2-2.5%). Median weekly rents reached $773 in Q4 2024, with house rents rising faster than units, offering attractive yields (3.1-4.5% for units, 3.5% for houses). This makes investment properties appealing, especially in high demand suburbs.
5. Unit Market Resilience
- Units are forecast to outperform houses in 2025, with predicted growth of 4-6% compared to 3.3% for houses. This is driven by affordability constraints pushing buyers toward apartments, especially in inner-city areas.
6. Property Cycles
- We are nearing the end of the existing property cycle which began in 2021-2022 and with the general 6-7 year cycle, the next property “boom” is expected to start in the next 12- 18 months. All suggestions are that we are on track for the next property cycle as interest rates come down and buyer sentiment increases.
Key Considerations
Your Goals: Are you buying to live in or invest? Investors may benefit from tight rental markets and long-term capital growth, while owner-occupiers face affordability hurdles but could lock in properties before further price rises.
Location and Property Type: Focus on A-grade homes or investment-grade apartments. Units may offer better value and growth potential than houses in 2025.
Timing: Acting early in 2025 could secure properties before anticipated rate cuts boost demand later in the year. However, waiting for potential price dips in overvalued segments might be prudent if you’re risk-averse.
Financial Position: Ensure you can manage high mortgage repayments, as affordability remains a challenge. Use government incentives if eligible, and consider suburbs with higher rental yields for investment.
Recommendation
For first time buyers, 2025 offers opportunities due to government schemes and a softening market, particularly for units in affordable suburbs. Act early to benefit from potential capital gains, but ensure your finances can handle high prices and borrowing costs. For investors, the tight rental market and long-term population growth make Sydney attractive, especially for well-located units or houses in high-demand areas. However, be cautious of overpaying in premium segments, as some forecasts suggest price declines.
It’s a good idea to consult a buyer’s agent or property advisor to target high-performing suburbs and avoid underperforming areas. Clarity on reduction in interest rates is now positive news for property investors and therefore waiting too much longer to enter the market may mean you miss out.
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