House prices tipped to soar as investors and first-time buyers pile in

First-home-buyer incentives and lower interest rates have sparked a national property scramble as confidence hits record highs, led by West Australians, who have emerged as nation’s most bullish property purchasers.

A Morgan Stanley survey found property buyers expect house prices to climb 5.7 per cent over the next year. More than one-in-five West Australians consider themselves somewhat likely, or very likely, to buy over the next 12 months.

“West Australia has the highest buyer intentions, including the highest percentage of respondents who are ‘very likely’ to purchase within the next 12 months, while Queensland has the lowest buyer intentions,” Morgan Stanley said on October 3.

The Federal Government’s expanded first home buyer scheme, which allows property purchases on just a 5 per cent deposit and no lenders’ mortgage insurance, has driven confidence in the market to a six-year high.

Buy-to-let property investor confidence is also surging as a mix of low interest rates and soaring immigration boost demand for rental homes, with Morgan Stanley’s survey showing Australians are keener than ever to become landlords.

“The biggest positive change in our 2025 survey versus previous years was the return of investor buying intentions, with 55 per cent of potential purchasers indicating they were interested in buying for investment this year versus owner occupier, up from just 35 per cent in 2024,” said Morgan Stanley.

The expectation for national property price gains of 5.7 per cent in the 2025 survey is well ahead of the 4.8 per cent expected in 2024 and the highest in the six years of the broker’s survey history.

Climbing prices

Average national house prices posted their strongest monthly gain in nearly two years in September to climb 0.9 per cent. Annual growth hit 4.3 per cent. The best-performing capital city over the last 12 months was Brisbane, where prices added 1.2 per cent in September to climb 8.8 per cent. Perth was second best capital city with annual growth of 7.5 per cent.

The September quarter’s strong gains equate to annualised growth of 9.4 per cent. Westpac’s economics team now expects rate cuts and the first-home buyer subsidies to boost prices 6 per cent over the next 12 months.

Economists are split on the chances of a November 4, Melbourne Cup Day, interest rate cut from the Reserve Bank.

Financial markets rate a 64 per cent chance of one more rate cut before the end of the year. The market expects 38 basis points of interest rate cuts by the Reserve Bank over the next year, before the easing cycle potentially ends with benchmark rates at 3.25 per cent.

The outlook could change. September quarter inflation data published on October 29 is likely to have a big impact on the Reserve Bank board when it meets on November 4.

Mortgage competition

The surging confidence in the property market is fuelling competition among lenders to win business from subsidised first-home buyers and existing property investors.

“With a potentially sizable cohort of new purchasers set to come to market, it is unsurprising that the banks have pivoted to chase this flow. Government support for new buyers is expected to boost credit demand and house prices further,” investment bank Citi said.

The bank’s research team said ANZ Bank is offering first home buyers $3,000 cashback on loans of more than $250,000. Commonwealth Bank is offering 100,000 to 300,000 Qantas Frequent Flyer points (equivalent to $2,000 to $4,000) for borrowers who apply directly with the bank rather than a third-party mortgage broker.

The strong run in 2025 for house prices and optimism around the outlook has sent bank shares up around 14 per cent this year, ahead of the 12.6 per cent return for the resources sector and 8.6 per cent for the broader S&P/ASX 200 Index. The best performing bank stock is Westpac, which started the year at $32.32 and traded at $39.29 on Monday afternoon.