Property and Interest Rate Update - June 2025
Written by Managing Director, Michael Harvey
Recently at a conference I heard an economic update from AMP economist Diana Mousina. Housing undersupply and the continual rise of property prices amidst interest rate changes is progressively making housing unaffordable for our young people.
As a father myself, I see the impact this makes on my children and their peers.
Here comes the rise of the Bank of Mum and Dad…
Housing Undersupply
At a macro level, there is a large undersupply of housing in Australia.
In rough terms there has been approximately 500,000 net immigration in Australia in the past 12 months. All of these people need a house to stay in.
The forecast is we need to build approx. 250,000 homes per annum; we currently build around 180,000 per annum.
We are going backwards nationally.
First principles of economics of supply and demand will tell me that property and house prices will continue to increase.
There are some anomalies in house price changes. Below are the past 12 month property price movements:
Annual Dwelling Value Changes by Capital City (May 2025)
City
Annual Change (%)
Perth
+18.7%
Adelaide
+14.6%
Brisbane
+12.6%
Canberra
+3.2%
Sydney
+2.0%
Melbourne
+1.5%
Darwin
+1.8%
Hobart
-0.4%
Some of these changes are quite dramatic, especially for Perth and Adelaide.
Melbourne is struggling with a lot of new property taxes being introduced.
What does AMP think about interest rates?
AMP are predicting rate cuts in August and November this year, February 2026 and possibly July 2026; so a 1% interest rate cut is being forecast overall from today’s rate.
Will this impact property demand. It will have some impact on affordability as the drop in interest rate will allow first home buyers to borrow more. It will also allow homeowners who may be looking to upgrade their home to have confidence and borrowing capacity to upgrade their home.
So what does this mean?
Residential property prices at a macro level under basic economic principle of supply and demand should still see price rises.
Will housing become affordable?
I can’t see this happening easily without the Bank of Mum and Dad…
The Bank of Mum and Dad
The "Bank of Mum and Dad" (BoMaD) has become a significant force in Australia's housing market, ranking among the nation's top lenders. Recent analyses estimate that BoMaD would be the ninth-largest mortgage lender.
Key Statistics and Trends
Average Contributions: In 2025, parents are providing an average of $74,040 to help their children purchase homes, up from $69,907 in 2021.
Forms of Assistance: Parental support comes in various forms, including cash gifts, loans, acting as guarantors, or allowing children to live rent-free while saving for a deposit. In 2025, 23% of parents provided rent-free accommodation, up from 15% in 2021.
Expectation of Repayment: There's a notable shift towards gifting, with 75% of parents in 2025 not expecting repayment, compared to 33% in 2021.
The Bank of Mum and Dad plays a key role in enabling homeownership for many Australians, but it does pose quite an ethical issue whereby many people without assistance from their parents will not be able to afford to own their own home.
