Australian homeowners are now $82,000 richer, but don’t get used to it – realestate.com.au

Although Australia’s housing market ended 2025 at a record high, the prospect of rate hikes has slowed price momentum in the country’s biggest property markets.

According to the latest PropTrack Home Price Index, home prices rose just 0.1% in December, but values ​​are now 8.8% higher than a year ago.

The data shows the price of a typical Australian home rose by $82,200 last year, with property value growth fueled by interest rate cuts, increased investor demand and expanded homebuyer incentives.

Even bigger price increases were recorded in Perth, Brisbane, Adelaide and Sydney.

Prices in Perth rose the fastest of any capital city in 2025, with the average home value rising 17.2% over the past year, equating to an increase of $148,100.

A typical Brisbane homeowner is about $136,000 richer on paper than a year ago, after home values ​​rose 14.6% by 2025.

Meanwhile, Darwin’s growth was on par with Brisbane’s at 14.5% after a rapid recovery took values ​​to new highs, boosting the price of a typical property by about $77,000.

Prices in the NT capital turned around in 2025, against the backdrop of a large decline in the number of homes on the market, increased demand for rental properties and a significant increase in purchases by investors seeking above-average returns.

An investor-driven boom in Darwin has pushed prices to new highs. Image: realestate.com.au/sold

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Adelaide house prices rose by just over $100,000, or 12.8%, in 2025, pushing the city’s average house price above $900,000 for the first time.

About the same dollar gain was made in Sydney, despite prices rising half as fast at 6.4% – a result of the city’s much higher property prices.

How house prices changed in Australia in December

Sydney was one of several cities where prices fell in December, with house price growth losing momentum towards the end of the year.

Values ​​fell 0.3% in December, with a similar drop in Melbourne and a slightly smaller price drop of 0.2% in Canberra.

Slower growth is expected for 2026

The slowdown followed a higher-than-expected inflation outcome in November, which put the brakes on further rate cuts and raised the prospect of a rate hike in 2026.

REA Group senior economist Anne Flaherty said the return of above-target inflation marked a pause in the rate-cutting cycle, but prices would continue to rise in the coming year.

“Although home values ​​are expected to rise to new record highs in 2026, the rate of growth is expected to be slower than in 2025,” she said.

“If inflation persists, there is even a chance that interest rates will rise, which would put downward pressure on the pace of house price growth.”

However, the ongoing challenge of building enough homes to accommodate the growing population would support prices, Ms Flaherty said.

“However, to counteract the impact of interest rates, the Australian property market continues to be characterized by an imbalance between supply and demand,” she said.

“While the pace of construction activity has increased, most markets continue to experience a shortage of new housing relative to the level of population growth.”

Affordable real estate markets are expected to outperform

Ms Flaherty said the federal government’s first home buyer scheme – which was expanded last year to remove income limits and lift price caps – would increase demand for more affordable homes.

The scheme offers first home buyers the opportunity to purchase with a 5% deposit and avoid Lenders Mortgage Insurance, lowering the barrier many buyers face when entering the market.

“These policies are expected to increase demand from first home buyers, particularly at the more affordable end of the market,” Ms Flaherty said.

“As a result, home price growth below these thresholds is likely to outpace the broader market.”

PropTrack data shows that prices in the more affordable regions of Sydney and Melbourne are already growing faster than in the more expensive parts of these cities.

Values ​​in Sydney’s south-west region rose 11.9% last year, while values ​​in the far south-west rose 10.3%.

According to Chris Philp, director of Stone Real Estate Macarthur, more and more buyers have come to the area since the expansion of the 5% down payment program, which was already impacting home values.

“It opens up a larger buyer pool for people who can now get into the market earlier,” he said.

“We have seen a huge price increase in these entry-level homes.

“So many families are moving here, but the prices are still incredibly affordable.”

Meanwhile, Melbourne’s northwest has outpaced the rest of the city in price growth, with values ​​rising 6.8% by 2025.

House price growth in relatively affordable regions such as south-west Sydney is expected to continue to outpace the broader market through 2026. Photo: Getty

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Andrew Koulaouzos, director of Barry Plant Taylors Lakes, said increased investor demand last year pushed prices higher – a trend he said would continue into 2026.

“We are being bombarded by interstate investors, and the buyer advocates we speak to don’t just have one or two clients on their books, they have a database of buyers looking to buy in Melbourne,” he said.

However, the 5% down payment program had helped level the playing field between first-home buyers and investors, who had recently increased the value of their homes.

“It gave people a little more confidence that they could go to the next drive and get something better than they imagined,” he said.

“For example, instead of buying an apartment, they could buy a small house.”