Although Australia’s housing market finished 2025 at a record high, the prospect of rate hikes has slowed price momentum in the country’s largest property markets.
Home prices rose just 0.1% in December, but values are now 8.8% higher than a year ago, according to the latest PropTrack Home Price Index.
The data shows the price of a typical Australian home rose by $82,200 last year, with growth in property values fuelled by interest rate cuts, heightened investor demand and expanded home buyer incentives.
Even bigger price rises were recorded in Perth, Brisbane, Adelaide and Sydney.
Prices in Perth grew at the fastest rate of all the capitals in 2025, with the median home value up 17.2% in the past year, equating to an increase of $148,100.
The median value of a home in Perth rose by almost $150,000 last year. Picture: Getty
A typical Brisbane homeowner is about $136,000 richer on paper than a year ago after home values rose 14.6% in 2025.
Meanwhile, Darwin’s growth of 14.5% was on par with Brisbane’s after a rapid recovery took values to new highs, adding about $77,000 to the price of a typical property.
Prices in the NT capital staged a turnaround in 2025 amid a big reduction in the number of homes on the market, increased rental demand, and a significant rise in buying by investors seeking above-average returns.
An investor-driven boom in Darwin has pushed prices to new highs. Picture: realestate.com.au/sold
Adelaide home values jumped by a little over $100,000, or 12.8%, in 2025, pushing the city’s median home price above $900,000 for the first time.
Roughly the same dollar gain was recorded in Sydney, despite prices growing half as fast at 6.4% – a result of the city’s much higher property prices.
How home prices changed around Australia in December
Sydney was one of several cities where prices declined in December, with the city’s home price rally losing steam toward the end of the year.
Values declined by 0.3% in December, with an equivalent fall in Melbourne and a slightly smaller 0.2% drop in prices in Canberra.
Slower growth expected for 2026
The slowdown followed a higher-than-expected inflation result in November, which put the brakes on further interest rate cuts and raised the prospect that interest rates would be increased in 2026.
REA Group senior economist Anne Flaherty said the return of above-target inflation meant a pause in the rate cut cycle, but prices would keep rising in the year ahead.
“While home values are expected to rise to new record highs in 2026, the pace of growth is expected to be slower than in 2025,” she said.
“Should inflation persist, there is even the potential that interest rates could rise, which would place downward pressure on the pace of home price growth.”
However, the ongoing challenge of building enough homes to house the growing population would support prices, Ms Flaherty said.
“Counteracting the impacts of interest rates, however, Australia’s property market continues to be characterised by an imbalance between supply and demand,” she said.
“While the pace of construction activity has picked up, most markets continue to face an undersupply of new homes relative to the level of population growth.”
Affordable property markets tipped 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 allows first-home buyers to buy with a 5% deposit and avoid Lenders Mortgage Insurance, lowering the deposit hurdle many buyers face when entering the market.
“This policy is expected to drive up demand from first-home buyers, particularly at the more affordable end of the market,” Ms Flaherty said.
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“As a result, home price growth beneath these thresholds is likely to outpace the market more broadly.”
PropTrack data shows prices in more affordable regions of Sydney and Melbourne are already growing faster than in pricier parts of these cities.
Values in Sydney’s south west region rose 11.9% last year, while values in the outer south west were up 10.3%.
More buyers have flocked to the area since the expansion of the 5% deposit scheme, which was already affecting home values, according to Stone Real Estate Macarthur principal Chris Philp.
“It opens up a bigger buyer pool for people who can now get into the market earlier,” he said.
“We’ve seen a massive price increase in those entry level properties.
“There's so many families moving here, but the prices are still incredibly affordable.”
Meanwhile, Melbourne’s north west has outpaced the rest of the city for price growth, with values rising 6.8% in 2025.
Home price growth in relatively affordable regions such as Sydney's southwest is expected to keep outpacing the wider market in 2026. Picture: Getty
Barry Plant Taylors Lakes director Andrew Koulaouzos said increased investor demand had helped drive prices higher last year – a trend he expected would continue in 2026.
“We’re getting bombarded by interstate investors, and the buyers' advocates we’re speaking to don’t just have one or two clients on their books, they have a database of buyers looking to buy into Melbourne,” he said.
However, the 5% deposit scheme had helped level the playing field between first-home buyers and investors, who had bid up home values recently.
“It gave people a bit more confidence that they could go to the next bracket to get something a bit better than what they had envisioned,” he said.
“For example, instead of buying a unit they could buy a small house.”
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