Residential real estate underpins the nation's wealth as some people struggle to find or afford a place to live, but home values fell at the end of a year where property investment underperformed against the stock market.
Australia's properties are worth about $11.1 trillion, significantly more than the combined total value of the stock market ($3.3 trillion) and superannuation funds ($4.1 trillion), according to data from property analysis firm CoreLogic.
But high interest rates and lagging performance could make property investment less attractive in the near-term, with equities outperforming property in 2024, home values beginning to fall and rental growth expected to moderate in 2025.
Accounting for capital gains as well as rental income, property offered a return of 8.3 per cent in 2024, compared to 11.4 per cent in equities.
The ASX hit a series of record highs, with inflation moderating and underpinned by a strong performance in the banking sector.
While property outperformed equities in six out of the past 10 years, some volatility, and periods of "booms and busts" are a normal part of investing over the long-term, CoreLogic economist Kaytlin Ezzy said.
"Regardless of asset type, time on the market has beat timing the market," she said.
More than half of a typical household's wealth is held in housing, whether in their home, an investment property, or both.
For renters, there is positive news, with growth expected to further lose momentum.
Following falls during the COVID-19 pandemic, rents shot up in 2022 and continued rising in 2023, but slowed in 2024, with CoreLogic's rental index showing a 4.8 per cent rise in the year to December.
Normalisation in post-pandemic migration and an increase in household size as people returned to sharehouses in a bid to split costs, could ease demand for rentals, Ms Ezzy said
"Outside of the usual seasonal uptick through (January to March), we would expect to see growth in rents continue to lose momentum in 2025," she said.
A potential fall in the appeal of property investment comes as the nation works to produce 1.2 million new homes by 2029, with high insolvency rates amongst building companies amid soaring construction costs.
