The respected financial institution, Macquarie Bank, has given its 2025 mid-year economic outlook, and it sounds positive for property owners and investors while giving hope to first-home buyers.
For anyone thinking of entering the market in the next 12 months, there is likely to be a concern at the back of your mind about the strength of the global economy and the impact of the threatened US tariffs on Australia and its trading partners, particularly China.
This uncertainty may be a reason why the Reserve Bank of Australia (RBA) has been extra cautious with interest rate reductions. We have had only two – in February and May – but there is an expectation of a third in August.
The Macquarie Bank forecast touches on all these points and fundamentally remains optimistic for the Australian economy and the housing market.
Here are the key insights:
Managing through headwinds
Macquarie says the global economy is being challenged by a US-led trade war, with growth likely to slow over the second half of the year.
“Like our global counterparts, these headwinds will impact Australia; however, we are well positioned to respond to global developments,” says Macquarie. “Australia has always been in the middle. It’s not as weak as Europe, it’s not as strong as the United States, and that looks like it’s going to persist.”
More rate cuts are in sight
“With inflation now back within the RBA’s target band of 2-3%, the central bank has been easing policy this year, with the first cuts to the cash rate since November 2020,” says Macquarie. “What the RBA does next is dependent on how the economy tracks for the rest of the year. To get a really large cut from here, you would need something bad to happen in the global economy.”
Labour market stays strong
“Employment growth has stayed very strong,” says Macquarie, “and part of the reason for that is we’ve had very strong growth in the care economy for the non-market sector. That growth is starting to slow back down (and) will coincide with a pickup in employment in the market part of the economy.”
Property price pressures continue
Macquarie says: “Overall, the Australian property market has been relatively sluggish over the last couple of years, as affordability constraints persist. Those constraints are keeping a ceiling on price growth, even though the RBA’s cash rate cuts have relieved some pressure.
“As always, it’s not one property market. Sydney is on a very different cycle to Melbourne’s, which is on a very different cycle to Perth’s.
“It looks like house prices at a national level will go up a bit in the next year. But given we still have really significant affordability constraints, they’re (not) going to go up very much.”