
🎉 Wish you all a very Happy New Year 2025! 🎉 Hope you had a good break and are ready to dive into 2025. I’ve made a small effort to put things in perspective for 2025. Hope you like it! 😊
Supply
Material supply chain issues have largely been resolved, but the labor and cost of construction haven’t. The number of new dwelling approvals has improved but is still not close to what is required.
Demand
Demand continues to be high across the board. Population internal and external movements continue to play a role in price change. If we look at strong growth in Qld and WA, growth has been supported by net internal movement from other states. This trend has continued in 2024. The question is, will it continue in 2025? Prices in NSW and state-based property laws in Victoria, I feel, are largely responsible for why people feel like moving away from these places. As for Victoria, the fact that the state has the largest debt does not help. Of course, weather is a big reason, as well as employers being flexible to allow teams to work remotely.
📉 Unemployment has continued to be low, hence there has been ongoing pressure on employers to retain staff, let alone quality staff. 💼 Employers have been forced to be more flexible than they would like to be. While trends to work from home (WFH) continue, employers have been asking teams to come back to the office more often. 🏢 It seems like the ecosystem is trying to find a new balance. While WFH comes with its own perks, going into the office is important for more than a few reasons. 🌟
Mental Health
Mental health comes to my mind as the first thing. Social interactions and supporting economic growth are also important.
Migration Trends
📊 If we look at migration to SA, there is little evidence supporting the price growth. Over the last 4 years, SA property price growth has continued to baffle me. 🤔 There are some cases of strong property prices in Canberra due to high population density, but population growth does not support demand. 🏡 Tas and NT continue to get a lower share in population growth. If we look at the graph, only Qld and WA are the two states which have positive natural growth, net domestic, and international migration, which clearly is reflected in price growth. 📈
Median Values
For me, this year’s biggest news on property front was the change in median values. Perth, Brisbane, and Adelaide property median values ticked over Melbourne. Why Adelaide? I still don’t know. … Lol! I would love to hear from someone who can explain the fundamentals for this growth.
Government Employment
📊 As shown by stats from the Institute of Public Affairs, the public sector has grown significantly over the last 2 years, while the private sector’s contribution is nowhere close. 🤔 Why are governments employing so many people? Clearly, we have a two-tiered system going on where the private sector is struggling to employ the right people at the right price. 💼
📈 On the other hand, the government sector has continued to grow. With the federal election in sight in 2025, I hope this frenzy would stop as the government needs to project a stronger balance sheet and higher profits. 📊 Elections are due in May 25, so I would imagine a pause in government employment resulting in unemployment going up, which might in turn build a case for an interest rate cut. 📉 I have been of the view that an interest rate cut should happen in Feb 25. However, recent unemployment figures make me feel it might be pushed out to March/April 25.
Interest Rates and Economic Outlook
📉 Interest rates have come into discussion, so let’s dive into what I foresee happening in the coming months and years with the Trump administration kicking in. 📈
Trump is a businessman through and through. One thing is sure under his administration, the US economy will flourish. 🇺🇸
What does that mean for us?
- Strong US trade means a weaker AUD, which can enhance Australian exports. 📉
- On the other hand, the US-China trade war can impact our exports to China. 🌏
Our exports should be strong in 2025, which in turn could fuel inflation and higher interest rates. 📊
- I feel we might get a 0.5% rate cut in 2025 and then hold and sustain it. 📉
- Anything higher could be an outcome of some extreme event. 🌪️
So, my suggestion is to not indulge in any ideas suggesting interest rates will go back to 2%. I don’t see that happening unless there is another chaos across the world. 🌍
As much as we want our interest rates to be 2%, we don’t want another major event shutting down the world. 🚫
Household Wealth Overview
Wealth Growth: Increased by 2.4% ($400.9b) to $16,884.9b in the September quarter, driven by strong share and housing markets. Below shows the graph, in net worth was driven by strength in the share market and housing market.
Property Market Outlook
🏡 As for the property market, I feel Sydney will go through a small correction in 2025. 📉
- Melbourne would slowly pivot to small growth towards the end of 2025 or early 2026. 📈
- Perth and Brisbane will continue their strong march, though it will be a bit less than what has been in 2024. 🚀
- Adelaide, I don’t know. 🤔
- The rest will continue to be similar to 2024. 🔄
So all in all, I feel it will be a year of consolidation for the majority of the markets. 📊
Falls are contained to Sydney and Melbourne, but those cities are so big that they’re enough to pull the national average down. 📉
Be aware of headline news in 2025. 📰 SQM has put some forecast figures for 2025 as below:
🔍 Closing Observations 🔍
2025 appears poised for a year of stabilization across property markets and broader economic conditions. 📊
Key drivers such as:
- Migration trends 🌏
- Government spending 💰
- RBA’s monetary policy decisions 🏦
These will shape the landscape. Strategic planning based on these insights will ensure businesses and individuals remain well-prepared for upcoming challenges and opportunities. 📈
I continue to maintain cash is king. 💵 Build your reserves as much as you can. Once the winds are favourable, your growth would accelerate. 🚀
Of course, everything I say is purely from what I see, hear, and feel. It is driven by our clients’ experiences, industry thought leaders’ views, and my gut feel. 🤔
Happy to hear from you on how you see things panning out in 2025. 🗣️
Wish you all the best. 🌟