Spotlight on Sydney’s 2025 End of Financial Year property market – some surprising trends and a focus on the ‘known unknowns’

Welcome to the Curtis Associates End of Financial Year newsletter, summarising the year that was.

It was tumultuous with geopolitical turmoil and overseas human carnage, domestic affordability constraints, private sector and labour market weakness, poor productivity,  gyrating share prices, extreme weather events as well as a Federal election locally and in the tariff menacing United States.

Despite all this, Sydney’s residential and commercial property markets finished the FY 2025 overall in better and more positive shape than the same time last year.

Where those markets and all their micro markets go from here will be heavily influenced by trends emerging from the FY 2025 and some known unknowns.

Trends

• Interest rates

While the first of two official 0.25% interest rate reductions on 19 February 2025 encouraged many buyers, the effects of the second reduction on 21 May 2025 were more noticeable for us at the coal face.

Although financial markets and forecasters hyped this as the start of a downward trend, the general price stability following the second reduction also had a lot to do with vendors withholding supply of properties (particularly in the Inner West, Lower North Shore and on the Northern Beaches), rather than buoyant buyer demand.

Nonetheless, the improvement in the exuberance of Sydney property buyers again confirmed the impact of interest rates on Sydney property prices as summarised by ANZ Economist, Sophia Angala after the RBA’s surprise interest rate hold on 8 July 2025:

“This decision is likely behind the 2.1pt fall in ANZ-Roy Morgan Australian Consumer Confidence. While the previous upward trend in Consumer Confidence is stalled for now, we expect a resumption of the improvement this year, as robust yearly growth in disposable incomes and further rate cuts (we expect 25bp cuts in August and November) flow through to households.”

Adding to the likelihood of further rate reductions will be the long overdue publication by the Australian Bureau of Statistics  to be released around December 2025 of more comprehensive monthly inflation figures, which should remove some of the RBA’s guesswork when fixing the official cash rate based mainly on quarterly inflation figures.

If movements in Sydney property prices since the 1970’s are any guide, when interest rates fall, property prices usually rise.

All else being equal, we expect that history will repeat itself in FY 2026.

The big question from FY 2025 is ‘will all else be equal?’… especially with US President Trump helming the so-called free world?

• Artificial Intelligence (AI)

In just under three years, Chatbots are slaying the Google search dragon – even faster than email did to the fax machine, DVD did to CD, and colour TV did to black and white.

The infrastructure needed to power AI has had a similarly profound impact on an otherwise slightly cooling industrial market with The Urban Developer reporting on 7 July 2025:

“Australia’s biggest property company, Goodman Group, is ramping up its data centre portfolio to more than half of its $13.7-billion workbook—and it’s not done yet”…

Further confirming the extent of the AI game changer, giant property group Charter Hall is following the same path.

AI’s implications and the issues it raises for all facets of the property industry, including choosing selling and buyers’ agents, were enormous in FY 2025.

As the AFR’s James Dore wrote on 21 May 2025:

“We are watching the web rewire itself. The search engine is being replaced by the answer engine. If left unchecked, that engine will soon spin into machine-confirmation bias, where self-reinforcing predictions masquerade as truth.

But it can be reversed. Trusted content creators, those with authority, rigour and real-world grounding, have a rare moment to become the backbone of the next knowledge layer.”

Consistent with this being an original and not machine generated newsletter, Curtis Associates, led by Chris Curtis, has for nearly two decades been and will continue to be, such a content creator.

According to the Daily Telegraph on 20 June 2025:

…Elly Strang, global content marketing lead at brand tracking business Tracksuit, says the technology isn’t designed to replace human faces or input…humans are [also] important [as] OpenAI’s own research suggests that rate of hallucinations – or AI making up answers – is getting worse despite the technology becoming more sophisticated.”

Another welcome aspect of AI’s disruption is its potential to expose and rid the real estate industry/aspirant profession of the proliferation of buyers’ agents who advise their clients based on machine learning and secondary sources but without personal due diligence or research.

As  the chorus of complaints gets louder, the unfortunate clients of such Sydney buyers’ agents will discover that machine driven due diligence can never replicate ‘in real life’ due diligence of the type underpinning the experienced and trusted advice Curtis Associates provides.

Every property, whether residential, commercial, industrial, development or alternative, has its positives and negatives; all of which:

– drive value and price

– can only be seen, smelt, heard or discovered on the ground and

– technology will never replicate.

Despite these truisms, the influence of AI on the property market and deciding which buyers’ agent to retain as well as the ethical, privacy and other issues it raises, are certain to grow.

For more on how to choose a buyers’ agent, see: There are hundreds of buyers’ agents, how do I choose one that’s right for me?

• Private credit

As the AFR explained on 1 March 2025 and mirroring overseas trends:

“Private credit firms, otherwise known as non-bank lenders, flourished after the 2018 banking royal commission, as banks pulled back from lending to riskier or less established parts of the market. Sectors which struggled to get loans included commercial property, hospitality and small to medium-sized businesses, which then became the natural customers of the growing non-bank lending scene. And it boomed. As rates rose, operators and investors collected double-digit returns with little effort.”

According to consultant Alvarez & Marsal​, by March 2025 private credit accounted for 14%  and 17% of Australian total debt, and commercial real estate debt, respectively.

No one in truth really knows the size of the Australian private credit market. The RBA thinks about $40 billion while others estimate between $1.8 billion to $188 billion.

That staggering range in figures reveal the lack of transparency in this space. Because existing disclosure regulations never contemplated private credit, it’s the high fee earners in this area who decide what and what not to disclose.

Hence the title of the last quoted AFR article: ‘It’s the Wild West.’

Given the historical “double-digit returns with little effort ” and that private credit is estimated by some now to account for 60% of the US debt market and 55% in the UK/Europe, unless checked as we discuss below, its growth in Australia is an inevitable trend.

• Build to Rent (BTR)

Having failed for several years to gain traction in Sydney, BTR projects roared out of the blocks in FY 2025 as shown in this graph:

A PWC Report “Build-to-rent in Australia – An evolving landscape” dated 11 December 2024 explains why:

“The housing affordability crisis in Australia is at an all time-high and has spurred a range of recent [State and Federal Government] tax measures targeting the [BTR] sector. These measures include reductions in income tax, stamp duty and land tax imposts for BTR investors, which are welcome changes that are clearly aimed at bringing investor returns on BTR projects in line with traditional commercial property asset classes such as office, retail, and industrial”…

This table summarises some of the Sydney BTR activity in the past 12 months; most of which are being assessed as State Significant Developments:

BTR in Australia lags many overseas countries and other obstinate local regulations as well as high land acquisition and construction costs all act as brakes on progress. However, the also long overdue passage of Commonwealth legislation in late November 2024 reducing the withholding tax on foreign investors from 30% to 15% and increasing the capital works deduction rate from 2.5% to 4% per annum can only help cement the growth trend in this space.

• State planning controls

While still the source of uncertainty (see below), in our experience over FY 2025, some of the NSW Minns Government’s reforms trying to meet the National Housing Accord target have exposed a few clear trends in the smaller scale property development end of the Sydney market.

An example Curtis Associates was recently involved with was the deceased estate sale of a knock down at 5 Harden Avenue, Northbridge on 24 May 2025 for $6.1 million at the auction of which our client was one of several underbidders.

Exceeding all expectations and then comparable sale evidence, that price eclipsed the $4.7 million paid for a knockdown at 23 Harden Avenue, Northbridge on 7 March 2024 which was identical in size (766m²), frontage (15m) and aspect to 5 Harden Avenue, but in a superior position in the street and without an expensive to remove power pole obstructing the driveway entrance.

The nearly 30% increase difference in just 14 months between these two prices can only be attributed to Harden Avenue, Northbridge having been included in Stages 1 and 2 of the Low to Medium Rise (LMR) reforms on 1 July 2024 and 28 February 2025.

Reinforcing that observation was the purchase we made with one bid at auction for the same  developer client a week later on 31 May 2025 of another deceased estate knockdown on 986m² and a wider frontage (20m) at 115 Sydney Street, North Willoughby.

While the presently undisclosed price our client paid (except to the army of under bidders and onlookers at the 40+ minute auction – go figure) exceeded the price paid for 5 Harden Avenue, Northbridge, on a $rate/m² basis, not only was that price exactly in line with our due diligence, the difference between it and the $6.1 million paid at 5 Harden Avenue was staggering.

Why?

The only explanation can be the planning controls: 115 Sydney Street, North Willoughby has not been included in the LMR reforms.

And needless to say, our client was delighted to have been an underbidder at 5 Harden Avenue!

 The ‘known unknowns’

• State planning controls

The impact of existing and other National Housing Accord driven actual and potential planning controls is otherwise less known than the impact of the LMR controls as per the Northbridge/North Willoughby discussion.

While a gaggle of selling agents trumpet the few megalot deals spawned by LMR and the earlier Transport Oriented Development reforms, whether those deals materialise is unknown as most are either under options or are conditional on approvals.

The difficulties of such consolidations is the subject of a detailed joint study by the City Futures Research Centre UNSW and Macquarie University titled  ‘Reassembling the City: understanding urban renewal through resident-led collective property sales.’

We were on to this over a year ago: The housing accord in nsw – off to a bad start

Then there was the failure to turn Rosehill Gardens Racecourse into the site of 25,000 new homes creating another unknown which has caused the NSW Minns Government to focus even more closely on other Sydney locations including Blackwattle Bay, Glebe Island, Long Bay Jail and now, the long ago abandoned Woollahra Train Station and its precinct.

As recently as this week, the NSW Housing Pattern Book, comprising six ready made LMR based designs was released; the intention being to speed up the approval process and which already has us fielding inquiries from developers.

And if these are not enough unknowns, the SMH reported on 11 July 2025: “Senior Liberal sources told the Herald in May that changes to the complying development certificates process, which would remove councils’ ability to assess projects on merit, were among numerous measures the government was considering to speed up the delivery of homes”.

Given previous and private certifier driven fiascos like the Opal Tower development with its structural issues causing residential evacuations, this last potential reform is truly frightening. We can only imagine the insurance premiums private certifiers would face if it is implemented.

• US President Trump

Based on the impact he has had in the past six months on world stock and other markets, President Trump threatens to cast a long international shadow.

Whether or not that will extend to Sydney’s property market remains to be seen but the inflows of foreign capital into the BTR and commercial property sectors during FY 2025 suggest that some big players see that market as a safe haven.

Only time will tell.

• Anti money laundering and counter-terrorism financing (AML/CTF) reforms

As reported in the SMH on 5 July 2025 “Australia sits alongside Haiti and Madagascar as one of few countries yet to expand anti-money laundering and counterterrorism financing laws to include [real estate agents, accountants and lawyers].”

This will change by 1 July 2026 when also long overdue Commonwealth laws come into effect.

According to the financial crime regulator AUSTRAC, billions of dollars are channeled each year into Australian houses, apartments and commercial properties which has inevitably pushed up prices in those markets.

While the effect these reforms will have on Sydney property prices is an unknown, a current Canadian study into similar reforms recently introduced there suggests that the money laundered in Vancouver (a property market with similarities to Sydney) inflated property prices in that city by 5% to 7.5%

The other unknown is the impact the cost of complying with these reforms will have on the three business types it targets, including buyers’ agents.

A further unknown is whether those businesses will actually be able to comply. Sources familiar with procedures at Sydney’s Star Casino inform us that a team of experts employed by Star even struggle to understand the complexity of similar reforms imposed in that space.

• Private credit

Whether the growth trend in this space continues will depend on ASIC whose first response in FY 2025 was “undertaking work to examine private credit and risks for retail investors more closely…[including] reviewing governance and practices relating to disclosure, distribution, conflicts, valuation and credit risk management.”

Since then, and as the AFR reported on 24 March 2025: “[t]he corporate regulator has ratcheted up its surveillance of the rapidly expanding private credit funds sector, where there has been a series of defaults and collapses, demanding details on governance, valuation modelling and investor protection measures”…

An ASIC spokesman declined to comment on the questionnaire that had been sent to some private credit funds, but pointed to previous comments that the regulator ha​s made that the sector ​was under review and ​that it would report its findings in the second half of the year”.

As this scenario is frighteningly similar to the CDO’s (collateralized debt obligations) that caused the GFC, we can only hope ASIC proves it has more teeth than it has bared in the past.

As the saying goes: ‘those who forget history are condemned to repeat it.’

Conclusion

There is never a dull moment in the Sydney property market and FY 2025 proved to be no exception!