2025 Outlook for Australia’s Commercial Real Estate Market and Residential Market Trends

Commercial Real Estate: Sydney Office Market Gradually Rebounding

According to top fund management institutions, the Sydney office market is expected to be the first to recover in 2025, driven by bottoming asset values and rising rents in prime locations. Both Investa and PGIM Real Estate predict that with expectations of interest rate cuts and a revival in office demand, the value of high-grade office assets will stabilize, leading to increased transaction activity.

Key Investment Points:

The capital return rate for premium office buildings surpassed 6% last year, indicating market valuations are stabilizing.
Melbourne’s market is expected to follow Sydney’s recovery trend, but it may take another year.
With market pressure easing and the hybrid work model stabilizing, leasing demand is likely to rebound.

PGIM also noted that central business districts (CBDs) in cities like Sydney, Seoul, Singapore, and Tokyo are expected to outperform non-core areas, presenting early investors with attractive entry opportunities.

Residential Market: House Prices May Double in Five Years

Recent analysis suggests that if the market continues its current growth trajectory, house prices across many regions could double within the next five years. According to PropTrack’s model, by 2029, prices in major cities and regions are expected to rise significantly.

Key Market Drivers:

Slow residential development progress combined with strong population growth.
In 2024, house prices across Australia rose by 2.73%, with Brisbane surpassing Melbourne as the second most expensive housing market.
Economists suggest that despite high interest rates, the imbalance between supply and demand and constrained construction activity will continue to support upward pressure on prices and rents.

Luxury Market: Sydney Sets New Transaction Records

Recently, a luxury property in Northbridge, Sydney, was sold for nearly AUD 30 million, setting a new record for the area. This highlights the resilience of the high-end residential market, which remains strong even during traditionally quieter seasons.

2025 Investment Opportunities and Risk Outlook

Veteran real estate expert Terry Ryder predicts:

Melbourne’s market will recover in 2025, supported by population growth and relatively lower housing prices.
The Queensland and South Australian markets have solid foundations and promising growth prospects.
Darwin’s market, with its high rental yields and low housing prices, is attracting increasing attention from investors.

Overall, the market is expected to remain highly segmented, with non-core areas outside capital cities continuing to benefit from remote work and lifestyle changes, creating new growth opportunities. For investors, accurately targeting markets in the early stages of growth will be crucial for achieving long-term returns.