Australians love rising home prices until they rise too fast, creating a constant battle between first-home buyers trying to get into the market and homeowners wanting to grow their household wealth.
Property economists and experts say there is no single number, but there is broad agreement on what a healthier and more sustainable housing market looks like.
Nationally, home prices have grown at an average rate of about 3% a year over the past two decades, lifting the median dwelling value from roughly $324,500 in 2006 to about $908,500 in 2026.
But that headline figure masks big differences in how growth is experienced, and whether it feels sustainable.
Ray White chief economist Nerida Conisbee said there was no single indicator, but suggested inflation and income growth were helpful.
“Ideally, home prices should grow at around inflation over the long term, and below income growth where possible,” Ms Conisbee said.
“That allows housing to preserve value without becoming progressively less affordable.
“Sustained price growth above income growth is not healthy. It creates wealth for existing owners, but it progressively locks out new buyers.”
This matters because income or wage growth in Australia has been relatively subdued for much of the past two decades.
Ray White's Nerida Conisbee says home prices should grow at around inflation over the long term, and below income growth where possible. Picture: Supplied
Over the past two decades, wages have generally grown between about 1% and just over 4% a year, with a long period of weakness through the 2010s, a pandemic‑era low and a post‑pandemic rebound.
Inflation over the same period has mostly been low and stable, generally sitting between around 1% and 3% for much of the pre‑pandemic era before spiking to nearly 8% after the pandemic and gradually cooling since.
Against that backdrop, LJ Hooker head of research and business intelligence Mathew Tiller said the pace of home price growth mattered more than the direction alone.
Australians love rising home prices until they rise too fast for first-home buyers to get into the property market. Picture: Getty
“If you zoom out, Australian home values have consistently risen over the long term, but it’s never a straight line,” Mr Tiller said.
“Housing markets move in cycles, and the pace of growth varies significantly between cities, suburbs and property types.”
Mr Tiller said not every market needed price growth every year.
Average annual home price growth by location over the past 20 years
| Region | 20-year average annual rate of growth | Median AVM May 2006 | Median AVM May 2026 |
| National | 3.0% | $324,500 | $908,500 |
| Sydney | 2.3% | $417,500 | $1,237,500 |
| Melbourne | 1.7% | $317,700 | $845,800 |
| Brisbane | 4.4% | $324,200 | $1,079,800 |
| Adelaide | 4.4% | $274,600 | $949,800 |
| Perth | 4.0% | $411,400 | $1,024,100 |
| Hobart | 3.9% | $249,400 | $734,900 |
| Darwin | 1.3% | $265,200 | $622,100 |
| ACT | 2.5% | $357,000 | $869,200 |
“Periods of flat prices or slower growth can actually be healthy, particularly after a strong upswing,” he said.
“If wages continue to rise while housing values stabilise, affordability gradually improves without the disruption of a major correction.”
However, Ms Conisbee warned that prolonged periods of flat or falling prices could create new risks if they discouraged housing supply.
LJ Hooker's Mathew Tiller says periods of flat prices or slower growth can actually be healthy for property markets,particularly after a strong upswing. Picture: Supplied
“Perth is the best example of this,” Ms Conisbee said. “Prices declined for an extended period after the mining boom, which made new development less attractive and reduced the incentive to add housing.
“When population growth picked up again, there was very little housing available. The result was not a gentle recovery, but extremely strong price growth because demand returned into a market with very limited supply.”
Perth has recorded the strongest median home price growth nationwide over the past five years, up 99.8% in May compared to five years ago, according to PropTrack.
REA Group senior economist Angus Moore said achieving a more sustainable or “goldilocks” rate of home price growth ultimately depended on supply.
“The way we make housing more affordable, in terms of what people can actually buy with their income, and the sort of housing they’re buying with that income, is by building more,” Mr Moore said.
REA Group's Angus Moore says new supply is key to achieving a more sustainable rate of home price growth. Picture: Supplied
“We need to give people more choice, and make that choice more affordable by having more of it.”
He said that meant building more homes in well‑connected and highly productive locations, particularly throughout inner‑city and middle‑ring suburbs where demand for housing was strongest.
Mr Moore said there was also an important role for new housing in other parts of the country, including regional areas where demand to live had increased.
However, he said improving affordability and keeping price growth aligned with incomes and inflation was a long‑term challenge.
“This won’t make a big difference in the short term because the number of homes we build each year is quite small relative to the total housing stock in Australia,” he said.
“But over the long term, that’s the only way we can sustainably improve housing affordability.”
Australia's median home price has grown 7.5% during the year to May, according to the latest PropTrack Home Price Index.
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