The Rules of Investing

Australian house prices have soared 17x since 1981. Where will they go in 2025?


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The Australian property market is incredibly nuanced. Markets like Brisbane, Adelaide, and Perth are soaring by double digits while the markets of Sydney and Melbourne have started to cool considerably. But even if prices in the largest housing markets are mellowing, it does not take away the core and indisputable argument: Housing may never have been affordable but now, the crisis is worse than ever.

Andrew Schwartz,

Co-Founder, CIO, and Managing Director at alternative real estate investment manager Qualitas, doesn't see this structural situation changing any time soon. When he is asked to reflect on the last 12 months in the property market, he effectively described 2024 as one of the less memorable periods of recent years.

"I think it'll go down as one of the less exciting years that we're going to think about when we reflect on the years that have gone by," Schwartz reflects. 
"As we're approaching the end of 2024, it's quite clear that markets are starting to slow down and a lot of that momentum is coming out of the market."

But he does see next year becoming far more "interesting", "fascinating", and even a "thriller" for investors in this asset class.

"I think it's getting very exciting in 2025. There are many reasons why I feel that but in particular, residential property is affected by supply and demand and interest rates. When you look at each of those individual factors, you do see a market where Australia is caught short on the supply side at the moment and it's been very hard to get supply into the market. We have quite significant demand coming in and we have had a sustained period of relatively high interest rates," Schwartz says.

Schwartz's comments here on this asset class really matter. Qualitas, the company he co-founded, has nearly $9 billion in funds under management today, mainly from overseas and domestic institutional investors who want to access the lucky country's most famous asset. An asset that, Schwartz argues, is a better store of value than stocks, crypto, and even gold.

On this week's edition of The Rules of Investing, Schwartz is sitting down with guest presenter Hans Lee to discuss his views on these key tailwinds, his take on the macro environment, and where he sees growth opportunities in the Australian property market today. 

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other key insights you can expect

Forget stocks, crypto, and gold: Residential property may be the best store of value out there

  • "I actually think that residential property is one of the best stores of value you can consider ... that is my personal opinion."
  • "A beautiful store of value is buying land and you know we are going to be more and more densified over time. Personally, I find it hard to move away [from property] but that is how I think about residential property as a store of value."
  • It's not about whether house prices rise, it's just about whether house prices will fall

    • "One of the key measures for us is around the margin the developer is earning on the project. I don't think about the margin as a developer making money per se. I think about margin as safety for error. How much could we afford for prices to wind back?"
    • Is the answer to unlocking housing supply just to "drop rates to zero"?

      • "There is no doubt that if you want to stimulate the next round of the housing market, it's about dropping interest rates. The cost of capital is such a big factor in delivering projects."
      • "However, the problem with dropping interest rates to that level is that one of the measures the RBA is very focussed on is the wealth effect of housing. The more people's houses are worth, the more they feel wealthy, and the more they go out and consume."
      • How much will it cost for Australia to build 240,000 homes a year?

        • "Construction costs have risen some 40% over the last three years in Australia. As a generalisation, housing prices and apartment prices, in particular, have not gone up by 40%."
        • "Groups like ours see a lot very large volume of project feasibility where developers would like to get their projects financed."
        • ...more
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