Australia’s Property Prices Keep Rising: Why Big Cities Lag
Synopsis
Housing costs throughout Australia increased by 1 percent in November though the rate of growth reduced compared to October. Property values in Sydney went up by 0.5 percent and Melbourne by 0.3 percent while other capital cities experienced increases exceeding 1 percent. Perths property listings remained 40 percent under the average. Cotality reported that housing affordability has reached its point requiring a decade to accumulate a deposit. Expectations for interest rate reductions were scaled back influencing buyer behavior. Auction clearance rates dropped below the ten-year average by mid-November. APRA introduced lending restrictions limiting loans with debt-, to-income ratios. Reserve Bank holds final meeting next week with no change expected.
Throughout November, property values throughout Australia kept increasing, though the rate of growth eased a bit. Sydney and Melbourne lagged behind the other capital cities. Cotality's monthly Home Value Index climbed by 1% nationwide in November. This marked the month in a row with values rising by 1 per cent or more, though it was a minor decline from the 1.1% gain in values during October. Price growth in the capitals softened somewhat.
Sydney and Melbourne Fall Behind
In Sydney, prices increased by 0.5% a month. Melbourne saw a gain of 0.3%. Every other capital city experienced growth of at least 1%. Tim Lawless, research director at Cotality, CoreLogi, mentioned that the preference for mid-sized capitals is particularly evident in Perth. Property listings in Perth remain over 40% below the average.
Sydney experienced a gap where supply fell short of demand. Listings were 2.2% under the five-year average. This stands in contrast to the 16% deficit in listings seen across all capital cities. Lawless mentioned that the slowdown in the Sydney market might be due to affordability limits restricting growth.
In September, Cotality discovered that housing affordability in Australia had reached its point across various indicators. Saving for a 20% deposit required to purchase a property in most capital cities would take over ten years. Lawless noted that the consequences of this affordability are already evident. The increase in housing prices has shifted towards the affordable segments of the market.
Expectations for Rate Reductions Maintain Elevated Prices
In 2025, the Reserve Bank reduced the cash rate on three occasions. Throughout a part of the year, predictions indicated that easing would persist. This uplifted confidence in the housing sector. Nevertheless, recent figures revealed that inflation might not be as controlled as initially believed. This diminished hopes for rate reductions. A few economists even revised their outlooks to anticipate rate increases.
Eliza Owen, who leads research at Cotality, mentioned that the minor slowdown in home price increases in November was somewhat expected due to the changing interest rate forecast. She explained that much of the market's drive was sustained by anticipated rate reductions in 2025. The shift in this outlook is significantly influencing buyers' choices.
Auction clearance rates have been decreasing since mid-September. By mid-November, they dropped beneath the ten-year average according to Cotality. Another element influencing the housing market as the new year approaches will be the introduction of lending restrictions.
New Lending Restrictions Coming
The banking regulator APRA announced it would limit loans with debt-to-income ratios to 20% of a bank’s new lending. The rule targets DTI ratios exceeding six. For example, a family earning $100,000 annually, obtaining a loan that raises their debts beyond $600,000 would fall under this limit.
Lawless mentioned that the APRA regulations would probably only minimally affect property prices, as recent mortgage approvals are still significantly under a DTI of six or higher. A report from REA Groups PropTrack indicated that a household with an income could have only afforded 15% of the homes sold nationwide in the 2025 financial year.
For more Australian property news and market updates, visit Inspirepreneur Magazine. Read more into housing trends that affect your financial future.
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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