The rate cutting cycle may have ended, but new data has revealed how much the nation’s hottest housing markets shifted during just 12 months of lower rates.
The Reserve Bank cut interest rates three times in 2025, before higher inflation prompted a backflip, with rates heading higher once again.
Lower borrowing costs helped lift home prices throughout last year, with Australia’s median home value up about 8% in the past 12 months.
But rather than a uniform trend unfolding across the nation, the types of suburbs where prices rose most varied widely, depending on the local property market conditions within each city or region.
REA Group executive manager of economics Angus Moore said lower interest rates played a major role in where prices rose and by how much, but affordability constraints, market momentum and investor activity were also key factors.
“What people can afford, which is a function of interest rates and incomes, is the key driver of home prices,” he said.
“Rate cuts we saw last year boosted borrowing capacities and that has been an important factor supporting home prices.”
Jump ahead to see:
- Where prices rose fastest in the past 12 months
- Affordable pockets of that capitals where prices rose most
- Booming regional hotspots
- Suburbs where property sales have surged
Mr Moore said lower interest rates had helped improve affordability, but rising prices in many traditionally affordable areas had dampened the effect.
Cities with tight supply constraints, including Perth, Adelaide and Brisbane, demonstrated the strongest price growth in the past year, but rapid price rises have shifted the affordability landscape, making it harder for some buyers to get into the market.
“Notably, Brisbane, Perth and Adelaide saw prices grow by more than borrowing capacities,” Mr Moore said. “Even with the rate cuts, affordability deteriorated.”
“In Adelaide, Perth and Brisbane, buyers have been facing more limited stock for sale, unlike in Sydney and Melbourne.”
“In Sydney, price growth slowed down at the end of 2025 and if we look at where that happened, it was the more expensive areas of the market.”
“That's consistent with affordability being a real constraint, and favouring more affordable areas.”
Where prices rose fastest during the rate cutting cycle
PropTrack data shows that many of the suburbs where prices rose fastest during the rate cutting cycle were among the most affordable within their local markets.
Mr Moore said this reflected an established trend towards stronger price growth in areas where homes were less expensive.
“The theme we have been seeing in recent years is the outperformance of more affordable homes,” Mr Moore said.
Interest rate cuts can have an outsized effect in more affordable areas, where borrowing constraints tend to be tighter.
Unit prices have jumped in the past year in Carins as more buyers and investors look to more affordable regional cities and suburbs. Picture: Getty
Even small increases in borrowing capacities can allow more buyers to compete for homes, fuelling price growth.
A reduction in interest rates, combined with high rental demand, also encouraged more investors to enter the market, further increasing competition.
“Rental market conditions have been very tight and rents have been growing very quickly and that's been encouraging a lot of investors around Australia,” Mr Moore said.
Affordable pockets of capitals outperform
While price growth tended to be strongest in more affordable suburbs, this wasn’t always the case, with some premium markets outperforming.
The Sydney suburbs with the most rapid price growth suburbs were mostly in the city’s west, including Bonnyrigg, Austral and Airds, where older homes are making way for new builds.
However, strong price growth was recorded in several multimillion-dollar suburbs at the premium end of the market, including Balgowlah Heights and Clovelly.
There was a similar price divergence in the unit market, with strong growth in pricier suburbs such as Bronte and Milsons Point, as well as areas where units and townhouses offered relative value.
Affordability constraints have encouraged some buyers to opt for low-maintenance townhouses over houses further from CBDs. Picture: realestate.com.au/sold
Real estate agent and LJ Hooker Liverpool director Larissa Schembri said units and townhouses were much cheaper than houses in suburbs such as Chipping Norton and Moorebank, appealing to buyers with limited budgets.
“House prices have gone up, but townhouses are a lot more affordable,” she said. “They’re a good starter for young couples and young families.”
Brisbane’s top growth suburbs included several in the Ipswich region to the west of the city, including Woodend, Riverview and North Booval, where houses are typically found for less than $800,000.
But Yeronga, with a median house price of almost $1.9 million, recorded the city’s fastest house price growth (up 35%) in the past year.
It was a similar situation in Melbourne, with values rising rapidly in affordable pockets such as Coolaroo (up 14%) and Frankston North (up 16%).
But Canterbury (up 20%) bucked the trend, given it’s one of the city’s priciest suburbs.
Strong demand from wealthier buyers has pushed values higher in premium suburbs such as Canterbury in Melbourne's east. Picture: realestate.com.au/sold
Kay & Burton Boroondara director Sophie Su said wealthy family buyers in Canterbury were often purchasing for proximity to private schools, with price rises driven more by strong demand and scarcity rather than interest rate cycles.
“I sold six houses in Alexandra Avenue in a few months, and at each auction we had 150 to 200 people in attendance and six or seven bidders,” she said.
Unit price growth was strongest in suburbs in Melbourne’s east such as Hampton, Canterbury and Kew East. Even though unit prices are high in these suburbs, the relative affordability compared with houses underpinned demand.
Value uplift encourages upsizing
Perth and Adelaide differed to the other capitals in that the suburbs with the strongest house price growth had median prices mostly in the $1-2 million range, making these among the priciest suburbs within each city.
This contrasts with the top performing suburbs in the past few years, which were typically found in the more-affordable parts of these cities.
More rapid growth in pricier suburbs could suggest increased demand from buyers who have upgraded to more valuable properties following significant increase in values.
Upgrading buyers have helped boost values in Perth suburbs such as Woodlands, where this five-bedroom house sold for $2.5 million last year. Picture: realestate.com.au/sold
Perth suburbs such as Woodlands and Hilton (both up 30%), and Adelaide suburbs such as Hawthorndene (up 37%) and Glenelg East (up 27%) recorded the fastest growth.
Meanwhile, unit price growth was strongest in inner Perth suburbs such as Jolimont and Bayswater, and inner and coastal suburbs of Adelaide such as Henley Beach, Glenelg South and North Adelaide.
Real estate agent and Belle Property Glenelg / Henley Beach principal Rhys Digance said there was a supply and demand imbalance in blue chip suburbs, with strong demand from families upgrading to larger or more valuable houses, and first-home buyers and investors targeting units.
"There’s a lack of quality homes available, so when they're listed they're snapped up," he said.
Mr Moore said recent data suggested more buyers were upgrading relatively quickly in areas where prices had grown rapidly.
House and unit prices have climbed even higher in some of Adelaide's beachside suburbs, such as Henley Beach and Glenelg South. Picture: realestate.com.au/sold
“There's been quite a significant increase in low LVR borrowing – sub 60% – which would be consistent with people upgrading with big equity behind them,” he said.
“Areas that have seen strong price growth have also seen a higher share of people selling relatively quickly, which could be consistent with people upgrading sooner than they had planned to.”
Buyers target regional hotspots
Of the top 10 suburbs with the most rapid house price growth in the past year, seven were located outside the capitals, with Derby in Western Australia topping the list with prices jumping by 48%.
A pickup in prices also coincided with the beginning of the rate cutting cycle across several affordable towns and suburbs across regional Victoria, NSW and Tasmania.
The lower price base in affordable suburbs can mean even modest price rises in dollar terms as a result of higher borrowing capacities can result in large percentage increases in prices.
Affordable coastal suburbs in Tasmania's north such as Devonport have been in high demand, with prices climbing as a result. Picture: realestate.com.au/sold.
Prices jumped higher in towns in western NSW such as Gilgandra and Portland, regional Victorian towns such as Ballarat, Stawell and Warracknabeal, and parts of Tasmania’s north coast such as Devonport and Port Sorrell.
Real estate agent and Buxton Ballarat director Peter Burley said the value uplift in Ballarat in the past year came after a surge of investment as interstate buyers discovered how undervalued the city’s homes were.
“We’ve seen a significant amount of investment from around the country,” he said. “Buyer’s agents from right across Australia are looking to invest in Ballarat.”
“What’s driving it is affordability. You get larger blocks, a great lifestyle for families, and we’ve been blessed with lots of good cafes and food culture influenced by Melbourne.”
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Sales surge in booming markets
PropTrack data has also revealed that the number of property sales has surged in the past year in several suburbs targeted by investors, particularly in the unit market.
Higher sales volumes can indicate a rise in buyer demand, increased investor interest and improved market confidence – conditions consistent with a lower interest rate environment.
Sales of units more than doubled compared to a year ago in a number of Darwin suburbs, including Darwin City, Rosebery and Nightcliff.
Darwin real estate agent Daniel Harris of Real Estate Central said the city’s recent boom was initially triggered by investors seeking affordable properties with high yields, but demand was now driven by owner-occupiers.
Sales of units have surged in Darwin City following a spike in investor demand. Picture: realestate.com.au/buy
“Properties are getting listed but they’re getting gobbled up straight away,” he said.
“The investors started the whole thing by taking out the cheaper units, but the mid-to-upper end of the market is all locals buying.”
Several ACT suburbs recorded notable increases, particularly in areas where new apartment construction has boosted supply of properties, including Belconnen, Campbell and Phillip.
House sales surged in more-affordable suburbs in Melbourne’s west, such as Laverton (up 85%) and Albion (up 67%), as well as in-demand regional suburbs such as Lake Albert in Wagga Wagga (up 74%) and Norlane in Geelong (up 79%).
Whether these conditions can continue remains to be seen, given this month’s rate rise and the potential for further increases in the year ahead.
Mr Moore said future interest rate movements would hinge on how inflation unfolded.
“Market pricing at the moment is for about a 50% chance of a second rate rise by the end of the year,” he said.
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