Australia’s property market delivered one of its strongest performances in recent memory throughout 2025, with prices climbing steadily despite affordability concerns and economic uncertainty. Now, as we move through the first quarter of 2026, it’s worth examining what last year’s record growth means for buyers and homeowners navigating today’s market conditions.
A Year of Remarkable Property Value Growth
Looking back at 2025, the numbers tell a compelling story. National home values climbed 7.5% over the year, with the median dwelling price reaching $888,941 by November, which is a significant jump from $825,349 in April. This sustained growth defied many economists’ predictions and represented one of the strongest annual performances since the post-pandemic boom.
What made 2025 particularly notable was how broad-based the growth became. After a period of divergence in 2024, where some markets surged while others stagnated, last year saw nearly every capital city recording solid gains. The momentum accelerated as the year progressed, with monthly growth hitting 1.0% by November, the third consecutive month of one per cent or higher increases.
The Mid-Sized Capitals Stole the Show
While Sydney and Melbourne saw steady gains throughout 2025, it was the mid-sized capitals that truly dominated the headlines.
Perth emerged as the standout performer, with values surging 13.1% annually and the median dwelling price reaching $914,229 by year’s end. In a symbolic shift that reflects years of divergent performance, Perth’s median home value overtook Melbourne’s for the first time in a decade, which is a milestone that seemed unthinkable just a few years ago.
Brisbane similarly impressed with 12.8% annual growth, pushing the median past the psychologically significant $1 million mark to reach $1,015,767. Adelaide followed with 8.2% annual growth and a median of $891,004.
Darwin was the surprise package, recording the strongest growth of any capital with values jumping 17.0% over the year to reach $578,871.
What Drove the 2025 Property Value Surge?
Several factors combined to fuel 2025’s exceptional price growth:
- Interest rate relief provided an initial boost to buyer confidence and borrowing capacity, with February’s rate cut supporting an upward shift in market conditions.
- Severe supply shortages in most markets created intense competition for available properties, particularly in Perth, Darwin, and Brisbane. By September, Perth had 45% fewer properties listed than average, Darwin was down 53%, and Brisbane showed a 31% shortfall.
- Improved sentiment following the resolution of federal election uncertainty in May helped stabilise buyer and seller confidence.
- Strong employment conditions and wage growth supported household purchasing power, even as affordability metrics reached record lows.
Regional Australia Continued Its Outperformance
Regional markets consistently outpaced capital cities throughout 2025, with values rising 8.6% annually compared to 7.1% in the capitals. By November, the regional median reached $723,107, representing a 65% increase over five-year levels.
This ongoing regional strength reflects a fundamental shift in buyer preferences that emerged during the pandemic and has proven remarkably durable. Improved remote work flexibility, lifestyle considerations, and relative affordability continue to draw buyers beyond metropolitan boundaries.
The Supply Picture Began Shifting
One of the most significant developments in the latter part of 2025 was the emergence of more stock. October saw total listings jump 10.9% nationally, with new listings surging 18.2% month-on-month according to SQM Research. This represented the first meaningful increase in available stock after months of drought-like conditions.
However, the fact that prices continued rising strongly even as more properties came to market indicated that demand remained robust heading into the new year.
Where We Stand in 2026
As we navigate the first quarter of 2026, several key questions face the market:
1. Will the supply increase continue?
The surge in listings during the final months of 2025 may signal a sustained shift, or it could prove temporary. More stock typically moderates price growth, but only if demand doesn’t keep pace.
2. How will global uncertainty impact local conditions?
Recent geopolitical tensions and economic volatility in international markets could influence buyer sentiment and investment decisions in Australia.
3. What’s next for interest rates?
The Reserve Bank’s decisions throughout 2026 will significantly impact borrowing capacity and buyer confidence.
4. Can affordability improve?
With dwelling value-to-household income ratios at record highs by late 2025, the market faces a fundamental challenge: how can growth continue when so many buyers are already stretched?
Sydney and Melbourne: Different Trajectories
Melbourne staged a notable recovery throughout 2025 after underperforming in 2024, recording 4.2% annual growth by November. However, values remained below previous peaks, suggesting the market still had ground to recover as we entered 2026.
Sydney, meanwhile, appeared to be bumping against affordability constraints despite reaching a record median of $1,269,659 by November. Monthly growth had moderated to just 0.5%, which is well below the national average. With listings tracking closer to historical averages than other capitals, Sydney’s smaller supply deficit and stretched affordability metrics may continue to limit rapid growth in 2026.
What This Means for Property Buyers in 2026
For those looking to enter the market in 2026, last year’s trends offer important lessons:
- The long-term trajectory remains upward: Despite occasional slowdowns, Australian property prices have consistently risen over time. Waiting for a significant correction has historically proven costly.
- Location matters more than ever: Even within strong markets, suburb-level performance varies significantly. Areas with good infrastructure, employment opportunities, and lifestyle amenities tend to outperform.
- Mid-sized capitals may offer better value: With Sydney showing signs of moderation and Melbourne still recovering, cities like Brisbane, Perth, and Adelaide may present stronger growth potential in 2026.
- Consider properties with potential: In markets where prices have risen sharply, well-located properties that need cosmetic work can offer better value than turnkey homes.
- Build in borrowing buffers: Even if price growth moderates in 2026, having extra capacity ensures you won’t be pushed out of your target bracket if conditions shift.
The Affordability Challenge Persists
Perhaps the most significant legacy of 2025’s growth is the affordability crisis it has deepened. National dwelling value-to-household income ratios hit all-time highs, creating substantial barriers for first-home buyers and those looking to upgrade.
This challenge is particularly acute in Sydney, where the median dwelling price exceeds $1.26 million, but it’s spreading to previously more accessible markets. Brisbane’s surge past the $1 million median mark and Perth’s rapid appreciation have eroded traditional affordability advantages.
Looking Ahead Through 2026
As we move through the first quarter of 2026, the market faces a period of recalibration. The supply increases seen in late 2025 may continue, potentially moderating the pace of growth. Auction clearance rates had already begun trending lower by year’s end, falling below decade averages, which is a sign that buyer competition was easing slightly.
However, the fundamental drivers that supported 2025’s growth (limited stock relative to demand, strong employment conditions, and supportive economic settings) largely remain in place. Unless we see a significant shift in these factors, the market is likely to continue its upward trajectory, albeit potentially at a more moderate pace.
If you’re considering entering the market this year, speaking with a finance broker can help you understand your borrowing capacity, compare loan options, and position yourself to act quickly when the right property appears. Contact us to evaluate your position in 2026.
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- Home Loan and Finance Frequently Asked Questions
- First Home Buyer Scheme Delivering Real Results for Australians
Dip. of Management (Deacon University)
Dip. of Finance/Mortgage Broking Mgt.
Assoc. Cert. of Business (Real Estate)
Assoc. of Mort. Ind. Assoc. of Aust. (AMIAA)
Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.