Prospects for strong buyer demand in 2025 look good, with the latest data released by the Reserve Bank indicating a significant rise in loans for home buyers, investors and businesses.

This challenges earlier predictions of a slowdown by economists, who continue to be obsessed with interest rates as the big factor that determines everything in real estate – despite all the mountains of evidence to the contrary.

Loans to residential property investors are the highest for two years, while loans to home buyers are the highest in 18 months.

The official data shows that, as at the end of December, annual business credit growth had reached 8.9%, marking the highest growth rate since May 2023.

Similarly, growth in investor loans for residential property reached 5.1% in December 2024, up from 4.7% in November, achieving its highest growth rate since December 2022.

Owner-occupied mortgage lending also grew, maintaining an annual growth rate of 5.7%, the highest since April 2023.

These increases have occurred despite stubbornly high interest rates and notwithstanding the forecasts from major economists that real estate demand and prices would fall because interest rates have remained unchanged at those high levels since November 2023.

Strong demand has continued because the national population has been rising strongly, boosted by high levels of migration from overseas; because the labour market has been quite strong and wages have risen; because most people got a tax cut in the middle of last year – and overall borrowing capacity has been pretty good.

In addition to those national factors, there have been myriad local factors which have caused individual property markets to boom.

Perhaps the biggest single factor is that there is an unprecedented level of infrastructure development – over $500 billion in projects under way in the past year and more in planning – and this creates high levels of economic activity and employment, which translates into demand for real estate.

It all bodes well for a solid year in residential real estate, with further impetus likely to come from reductions in interest rates – and possibly a change in federal government, which looks increasingly likely.

But keep in mind that real estate is local in nature – and there will be out-performers in 2025, as there were last year and indeed in every year in recent memory.