Australia’s housing market, which surged through much of 2025, showed clear signs of moderation in December, marking the slowest monthly growth in five months and declines in the nation’s two largest cities.
According to Cotality (formerly CoreLogic) Research Director Tim Lawless, the national Home Value Index rose just 0.7% in December—the smallest gain since July. This followed stronger increases earlier in the year, driven by interest rate cuts starting in February.
Sydney and Melbourne recorded their first monthly declines (-0.1% each) since January 2025, reflecting severe affordability constraints in these high-priced markets.
“It’s been a little while since we’ve seen a negative movement,” Mr Lawless noted, adding that momentum had been fading in both cities heading into year-end.
He attributed the slowdown to renewed speculation that the Reserve Bank’s rate-cutting cycle may have ended, with some analysts now forecasting potential hikes in 2026 amid persistent inflation pressures.
Combined with ongoing cost-of-living strains and worsening affordability, these factors have “taken some heat out of the market.”
Despite the softer finish, 2025 proved a strong year overall: national dwelling values climbed 8.6%, adding approximately $71,400 to the median value, pushing it to around $901,257.
This represented the best annual growth since 2021’s pandemic-fueled boom.
December Capital City Performance
Growth remained uneven across capitals:
- Adelaide and Perth: Led with +1.9% each, continuing their strong runs driven by relative affordability and tight supply.
- Darwin and Brisbane: Both up +1.6%.
- Hobart: +0.9%.
- Canberra: Modest +0.2%.
- Sydney and Melbourne: -0.1%.
Economists highlight ongoing demand support from schemes like the 5% deposit initiative for properties under $1 million, as well as pockets of affordability in mid-sized cities and regional areas.
Ray White chief economist Nerida Conisbee pointed to Perth, South-East Queensland, Adelaide, and even Melbourne’s abundant low-cost apartments as more accessible options.
Sydney remains particularly challenging, with a median house price of $1.5 million—far out of reach for average-income households.
Nationally, combined capital city medians sit at $991,331, while regional areas are at $734,351.
“It’s getting really, really hard for young people to get into that market,” Ms Conisbee said.
Outlook for 2026: Subdued Growth Ahead
Experts anticipate a more tempered market in 2026, heavily influenced by interest rates.
With speculation mounting over possible RBA hikes rather than further cuts, buyer confidence has waned.
Mr Lawless expects continued weakness in Sydney and Melbourne but no sharp falls nationally, citing persistently low listings and insufficient new home construction as counterbalancing forces.
Tighter lending rules incoming from regulators will also curb high-risk borrowing.
Real estate agent Jordon Le Breux offered a steadier view: “As long as interest rates remain unchanged, I don’t think it’s going to boom or drop—just very steady.”
Overall, while underlying shortages support prices, affordability barriers and monetary policy uncertainty point to slower growth ahead.
