Home prices across Australia rose by an average $71,400 in 2025, marking the strongest year of growth since 2021, but a dip in momentum in the final month of the year signals values won’t rise as fast in 2026 as the interest rate outlook swings against the market.
Nationally, home prices rose by 8.6 per cent last year to a median of $991,331 after three Reserve Bank rate cuts boosted borrowing capacity, but the pace of monthly growth slowed to just 0.7 per cent in December.
Combined house and unit values in Sydney rose by $75,378 over the year to a median price of $1.28 million, while dwellings in Melbourne rose by $40,350 to a median of $827,117, according to data provider Cotality.
Homes in Perth grew the most, by $129,211, to a new median of $940,635, Brisbane’s dwelling values increased by $126,035 to take the median price above $1 million for the first time, and Adelaide prices grew by $72,268 to $902,249.
Cotality’s research director Tim Lawless said there was a range of factors behind the strong growth in home prices, but the RBA’s 75 basis points of rate cuts was probably the single most important.
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“It’s no coincidence that we saw the market moving back into an upswing in February. I suppose that stimulus from our interest rates alongside the already really tight supply levels is probably the best explanation of why we’ve seen a pretty strong growth outcome through the year,” Lawless said.
In the Perth, Adelaide and Brisbane markets, the number of advertised homes for sale had dropped by up to 50 per cent compared to their seasonal averages, he said.
“The markets that have seen the strongest growth outcome have seen the biggest mismatch between supply and demand,” Lawless said.
The growth was widespread. The value of homes in Darwin increased by $89,480 to a median price of $586,912, Hobart’s home prices rose by $44,000 to $720,341 and home values in Canberra increased by $44,146 to a median of $893,907.
Overall, prices in regional areas grew by 9.7 per cent, outperforming the combined growth in the capital cities of 8.2 per cent.
Inward migration levels remained strong, which favours regional Australia, Lawless said. In addition, regional markets tend not to be as interest rate sensitive as the capital city markets, which is supportive in a backdrop where economists are factoring in the prospect of an RBA rate increase, possibly as soon as February.
“Then there’s also the affordability component. Even though regional markets have seen a pretty decent clip of growth over the past five years, they generally still offer a lower price point than their capital city counterparts,” Lawless said.
Homes priced at the lower end of the market grew in value by 11 per cent in 2025, compared to growth of 6.7 per cent at the top end. Lawless said that was due to competition from investors, first home buyers and broad mainstream demand fighting for stock at the more affordable price points.
But last month, the price of dwellings in Sydney and Melbourne declined by 0.1 per cent, signalling a softer start to 2026 as rate hike fears and affordability pressures make buyers more conservative, according to Cotality.
“The rate of growth we’ve been seeing for 2025 wasn’t anywhere near being sustainable, so the market was going to have to slow down at some stage. We’re starting to see some of those demand-side fundamentals losing their potency … but the supply side hasn’t really changed. We’re still seeing listings really tight,” Lawless said.
Gold Coast booms
SQM Research director Louis Christopher said his figures show the Gold Coast, which is classified as a regional area, grew by 24 per cent in 2025.
“Queensland’s definitely got the strongest population growth rate in Australia. Once again, it’s running at about 2.5 per cent. There are multiple reasons for it … affordability and lifestyle, these are probably the two main factors,” he said.
Christopher said 2025’s rental prices, based on SQM’s numbers, rose faster than the consumer price index at 5.3 per cent as a capital city average, as a shortage of affordable housing drove up prices.
“The shortage we’ve had of housing for 2025 has reflected in rents and housing prices being over and above the cuts in interest rates,” he said.