Australia's housing market has reached a new national median house price exceeding $1 million, driven by sustained growth. However, market performance varies across capital cities, with some experiencing strong price increases while Sydney and Melbourne show slower growth or slight declines. The rental market continues to face record low affordability, characterized by rents rising significantly faster than wages and persistent low vacancy rates.
Government policies, interest rate changes, and housing supply shortages are identified as key influencing factors shaping these complex market dynamics.
Overall Housing Market Trends
Australia's housing market recorded its 12th consecutive quarter of growth in late 2025, marking the longest uninterrupted growth cycle since 2012-2015. National house prices increased by a combined 3.9 percent in the December 2025 quarter and 9.6 percent annually, an increase of approximately $111,728.
By March 2026, the national median home value reached $933,137, according to Cotality, while PropTrack reported a median of $908,000, representing a 9.4 percent annual increase.
As of December 2025, six capital cities—Sydney, Melbourne, Brisbane, Adelaide, Perth, and Canberra—had median house prices exceeding $1 million. Perth recently joined this exclusive group.
Combined median home unit prices for Australian capital cities increased by 3.5 percent in the December quarter and 6.8 percent annually, reaching $722,811.
Capital City House Price Performance (Late 2025 - Early 2026)
Strong Growth Regions
- Perth: Led national growth at the end of 2025 with an 18.4 percent annual rise in median house prices and a 17.8 percent annual jump in home units. It continued to show significant increases into early 2026, with a 2.3 percent price increase in February, a 7.3 percent surge in the first quarter, and a 2.5 percent monthly change in March, bringing its median to $1,017,698. PropTrack data indicated a 21 percent annual increase, pushing its median above $1 million for the first time.
- Brisbane: Achieved double-digit annual increases, with a 13.3 percent annual change and a 4.5 percent climb in the December 2025 quarter, reaching a median house price of $1,171,237. In early 2026, prices rose 1.6 percent in February and 1.8 percent in March, with a median of $1,101,151.
- Adelaide: Experienced a 5 percent quarterly and an 11.9 percent annual increase, reaching a median of $1,094,427 (Domain, Dec 2025). Adelaide saw a 1.3 percent price increase in February 2026 and a 1.2 percent monthly change in March, with a median of $937,021.
Slower Growth or Declining Regions
- Melbourne: Demonstrated slower growth compared to other major cities over the past five years (15.5 percent increase vs. 80-90 percent in Brisbane, Adelaide, Perth). Its median house value in December 2025 reached $1,111,084. However, early 2026 saw minimal to no price movement in February and a 0.9 percent decline in the first quarter, with a median of $828,249 by March.
- Sydney: Recorded the nation's slowest growth for houses in the last three months of 2025 (2 percent quarterly, 6.4 percent annually), with its median house price approaching $1.76 million. Early 2026 saw minimal to no price movement in February, a 0.4 percent drop in value for the first quarter, and a 0.1 percent monthly decline in March, with a median of $1,295,387. The top quarter of homes in Sydney experienced a 0.9 percent decrease.
Other Capitals
- Darwin: Saw house prices increase by 22.4 percent annually to a median of $690,896 in December 2025.
- Canberra: House prices rose 3.6 percent to nearly $1.4 million in December 2025, their highest in two years. However, home unit prices saw a second consecutive quarterly decline, falling 1.3 percent to $611,466.
Regional property prices also performed strongly, with a combined average of over $750,000 and values increasing at nearly twice the rate of major cities in February 2026.
Rental Market Trends
Australia's rental market experienced a modest seasonal easing at the close of 2025, but underlying conditions remained tight. The national residential vacancy rate increased to 1.4 percent in December 2025.
Despite slight increases, vacancy rates remained below long-term averages, with many capital cities below 1 percent, including Perth (0.7%), Adelaide (0.9%), Brisbane (1.2%), Darwin (1.0%), and Hobart (0.4%).
Nationally, advertised rents increased 2.4 percent over 30 days and were 5.8 percent higher year-on-year in December 2025, with the national combined weekly rent averaging $684.62. Annual rental growth accelerated to 5.4 percent in January 2026.
Over the past five years to September 2025, Australian rents increased by 43.9 percent, 2.5 times faster than the 17.5 percent growth in wages.
City-Specific Rental Changes
- Melbourne: Was the only capital city to experience a rental price drop for houses, with rents decreasing by 1.7 percent over the year to December 2025, averaging $580 per week. Conversely, unit rents in Melbourne increased from $550 to $580 per week during the same period, matching house rents and showing stronger growth.
- Perth: Rents increased by 6.2 percent in the 12 months ending January 2026, with regional Western Australia seeing an even higher increase of 10.1 percent. Over five years, Perth experienced a 66 percent increase in average rents, significantly outpacing its 18.5 percent wage growth.
- Hobart: Recorded the largest national increase in house rents over the 12 months ending December 2025, at 7.1 percent.
- Canberra: Experienced a 1.0 percent monthly decline and a 1.6 percent annual fall in rents in December 2025.
- Sydney: Maintained the highest median dwelling rents among capital cities, averaging $817 per week. House rental asking prices increased 1.3 percent in the December quarter, reaching $800 per week, while units commanded $750.
Affordability Challenges
Housing affordability in Australia has reached record lows across both the ownership and rental markets.
Home Ownership Affordability
- The average age of first-time homebuyers is increasing, with Westpac data indicating an average age of 34, and one in five first-home buyer loans in the past year going to individuals over 40.
- Home ownership among 25-29-year-olds decreased from 50 percent in 1971 to 36 percent in 2021, and for 30-34-year-olds, it fell from 64 percent to 50 percent.
- Saving for a 20 percent deposit on a median-priced home now takes nearly six years on average nationally, almost double the time 30 years ago.
- For an entry-level house, repayments now average 48.9 percent of a couple's income, a 24 percent increase over five years. For units, this figure is 30.9 percent.
- Between 2020 and 2025, the national price of entry-level houses increased by 68 percent, rising from $408,000 to $685,000, while wages grew by approximately 22 percent.
- An average couple seeking their first home cannot afford an entry-level house in any Australian city, a significant decline from five years ago when only Sydney was considered unaffordable.
- The average full-time salary of $106,657 is insufficient to purchase a median-priced house in Australia's largest state capital cities.
Rental Affordability
- Tenants now allocate an average of 33.4 percent of their pre-tax income to rent nationally, reaching a record high. This figure exceeds the decade-long average of 29.2 percent.
- Property management guidelines typically suggest that rental costs should not exceed 30 percent of a household's income to mitigate housing stress.
- In Western Australia, rental affordability is at an all-time low, with over half of households considering their housing unaffordable.
Factors Influencing the Market
Several factors are contributing to the current market dynamics:
Government Policies
The national First Home Guarantee scheme, allowing a 5 percent deposit, has reduced demand for rentals as more tenants pursue property ownership and has supported growth at the lower end of the sales market. Conversely, Victorian state taxation changes, including increased land taxes and a greater absentee owner surcharge, have led to some investors divesting properties and choosing to invest in other states. The Property Council noted that investment in Victoria is among the lowest nationally, impacting rental supply. There are ongoing discussions regarding potential cuts to landlords' capital gains tax discounts and negative gearing deductions, which could influence investor behavior.
Interest Rates
Improved borrowing capacity followed three interest rate cuts in 2025. However, the Reserve Bank of Australia (RBA) raised the official cash rate to 3.85 percent and further hikes are predicted for 2026. Rising interest rates are observed to have a more significant impact on the higher end of the market due to reduced credit availability, while competition among banks has lowered mortgage rates, contributing to a surge in home loans.
Supply and Demand
A severe mismatch between population growth and housing construction is evident, with KPMG projecting housing supply to fall short of targets by approximately 30 percent over the next two years. High construction costs, particularly for medium and high-density housing, could slow future development. Melbourne's housing supply has been described as robust, offering tenants more choices, while Perth, Brisbane, and Adelaide continue to face low housing stock, creating competitive environments for buyers. For the rental market, tight vacancy rates, smaller household sizes, and slow housing supply growth have contributed to rising rents.
Migration
High migration into Western Australia and positive net migration into Queensland are driving demand in those regions. Adelaide's demand has also been influenced by interstate and international migration. Melbourne, however, has experienced a prolonged period of negative interstate migration.
Investor Behavior
While some investors have exited the Victorian market due to tax changes, property investor loans nationally surged by nearly 8 percent over the past year. Some interstate investors are reportedly returning to Victoria due to its relative affordability compared to other states, while others are selling properties due to rising cost-of-living pressures.
Future Outlook
Economists and property experts anticipate varied trends for the Australian housing market. KPMG forecasts that median prices in all major capital cities will exceed $1 million by early 2028, with national prices expected to rise by an average of 7.7 percent over 2026 and similar growth anticipated for 2027. Some projections suggest Sydney's median house price could reach $2 million within two years (2027 or 2028), and Brisbane's real estate market is expected to remain robust.
However, a general slowdown in the pace of growth is emerging, particularly in Sydney and Melbourne, influenced by rising interest rates, buyer hesitancy, and affordability constraints.
Price declines are beginning to appear in some inner and middle-ring markets in these cities, with potential for further falls if interest rates continue to rise.
For the rental market, while some seasonal easing in late 2025 was observed, SQM Research indicates renewed upward momentum entering 2026. Affordability pressures are expected to continue without a sustained increase in new rental supply, as demand continues to exceed available supply. Domain predicts Melbourne's rental costs will remain stable due to an "affordability ceiling" being reached, suggesting rents are unlikely to accelerate significantly.
Experts emphasize the need for increased housing supply, with suggestions including build-to-rent developments, incentives for private investment, and planning reforms to allow higher-density housing. The WA Make Renting Fair Alliance has advocated for legislating limits on rent increases.