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Australia's property market in September 2025 shows mixed signals with capital cities experiencing modest growth while regional areas continue to outperform.
Housing prices across major cities like Sydney, Melbourne, and Brisbane are rising at different rates, with Brisbane leading capital city growth at 6.7% year-on-year while Sydney and Melbourne show more moderate increases around 2.2%. Regional markets are significantly outpacing capitals with 6.5% annual growth, driven by lifestyle migration and remote work trends. Rental markets remain extremely tight with national vacancy rates at historic lows of 1.2%, while interest rate cuts to 3.60% provide some relief but haven't meaningfully improved affordability for new buyers.
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Australia's property market outlook for late 2025 shows continued price growth across all major cities, with Brisbane leading at 6.7% annual growth while Sydney and Melbourne maintain steady but moderate increases around 2.2%.
Regional markets are significantly outperforming capital cities with 6.5% growth, driven by lifestyle migration and affordability pressures forcing buyers to look beyond major urban centers.
| Market Indicator | Current Status (September 2025) | 12-Month Outlook |
|---|---|---|
| Sydney House Prices | $1,525,956 (+2.2% YoY) | 4-5% growth expected |
| Melbourne House Prices | $983,000 (+2.15% YoY) | 4-5% growth expected |
| Brisbane House Prices | $1,019,865 (+6.7% YoY) | 5-6% growth expected |
| National Vacancy Rates | 1.2% (record lows) | Remain tight at 1.3-1.5% |
| Interest Rates (Cash Rate) | 3.60% (cut in August) | Further cuts to 3.10-3.35% |
| Rental Price Growth | +4.5% nationally | Continue rising 3-5% |
| Housing Supply Shortage | 262,000 homes over 5 years | Shortage to persist |
What's happening with housing prices across major cities like Sydney, Melbourne, and Brisbane right now?
As of September 2025, Australia's major capital cities are experiencing varied price movements with Brisbane leading the growth trajectory.
Sydney's median house price has reached $1,525,956, representing a 2.2% increase year-on-year. The city's growth is steady but moderating due to severely stretched affordability, with the average household needing over $200,000 annual income to purchase a typical home.
Melbourne's housing market shows gradual recovery with median house prices at $983,000, up 2.15% over the past 12 months. The city's values remain below their 2022 peaks as the market continues its measured recovery from previous downturns.
Brisbane demonstrates the strongest performance among major capitals with median house prices at $1,019,865, marking a significant 6.7% year-on-year increase. This growth is driven by interstate migration, lifestyle preferences, and investor demand as the city closes the value gap with Sydney and Melbourne.
How are regional property markets performing compared to the capitals?
Regional Australian property markets are significantly outperforming capital cities with 6.5% annual growth compared to capitals' 4.3% increase.
This outperformance stems from several factors including remote work flexibility allowing people to relocate from expensive capitals, relatively more affordable entry prices, and lifestyle migration trends accelerated by the pandemic. Regional areas benefit from lower price bases, making percentage gains more achievable.
However, this strong growth is creating affordability challenges in previously accessible regional markets. Towns that were once considered budget-friendly alternatives are now experiencing their own housing stress as values climb rapidly.
The trend is expected to continue through 2025-2026, though the growth rate may moderate as regional prices catch up to historical norms relative to capitals.
What's the current trend in rental prices and vacancy rates across Australia?
Australia's rental market in September 2025 is experiencing severe tightness with national vacancy rates at historic lows of 1.2%.
National advertised rents average $651.60 per week, representing a 4.5% year-on-year increase. Capital city rents are significantly higher at $748.02 per week, reflecting the premium for major urban markets.
Individual city vacancy rates show extreme tightness: Perth leads with just 0.7% vacancy, Brisbane at 0.9%, and Sydney at 1.5%. These rates are well below the 2-3% considered balanced, indicating severe rental shortages.
Rental growth has re-accelerated particularly for apartments and units, as affordability pressures force tenants to downsize from houses to smaller dwellings. This trend reflects the broader housing affordability crisis affecting both purchase and rental markets.
It's something we develop in our Australia property pack.
How are interest rates expected to move over the next 12 months, and what impact will that have on mortgages?
The Reserve Bank of Australia cut the cash rate to 3.60% in August 2025, with major banks forecasting further reductions to 3.10-3.35% by early 2026.
These rate cuts provide some relief to existing mortgage holders and slightly improve borrowing capacity for new buyers. However, the affordability benefits are largely offset by continued house price growth, meaning the overall purchasing power improvement is modest.
For existing homeowners, each 0.25% rate cut reduces monthly repayments by approximately $150-200 on a $500,000 mortgage. This provides some breathing room for households under mortgage stress.
Despite lower rates, median mortgage costs still consume about 48% of family income nationally, down only 2 percentage points from late 2024. This remains well above historical norms and sustainable levels, particularly in Sydney and Melbourne where the burden is heaviest.
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What's the latest on housing supply—are new builds keeping up with demand?
Australia's housing supply is failing to meet demand, with new builds significantly lagging behind population growth requirements.
Net new housing supply is projected to average approximately 188,000 homes per year through 2029, well below the government's ambitious targets and actual demand. This creates a projected shortfall of 262,000 homes over the next five years.
Construction delays, labor shortages, and regulatory bottlenecks continue to hamper new dwelling completions despite government fast-tracking initiatives. The building industry faces ongoing challenges with skilled worker shortages and supply chain disruptions.
Government interventions including the National Housing Accord aim to deliver 1.2 million new homes over five years, but industry experts remain skeptical about achieving these targets given current construction capacity constraints.
How is population growth and migration influencing housing demand in different regions?
Record net overseas migration is creating unprecedented housing demand pressure across Australia, with arrivals at all-time highs significantly outpacing dwelling supply.
Most new arrivals concentrate in Sydney, Melbourne, Brisbane, and Perth, intensifying competition for housing in these already-expensive markets. This migration pattern explains why capital cities maintain price premiums despite regional growth outpacing them.
Regional areas are also experiencing increased migration pressure, particularly lifestyle destinations and areas offering remote work opportunities. Towns in Queensland, New South Wales coastal regions, and Victorian regional centers are seeing unprecedented demand from both international migrants and interstate movers.
The migration-to-housing-supply imbalance is the primary driver behind current market tightness, with each new resident requiring accommodation in an already undersupplied market.
What government policies, tax changes, or grants are currently affecting buyers and investors?
The Australian government has implemented several major housing initiatives aimed at increasing supply and supporting first-home buyers.
| Policy Initiative | Key Features | Impact on Market |
|---|---|---|
| Home Guarantee Scheme Expansion | Unlimited places, no income caps for first home buyers | Increased buyer activity in entry-level segments |
| National Housing Accord | 1.2 million new homes target over 5 years | Long-term supply increase (if achieved) |
| Housing Australia Future Fund | $10 billion for social and affordable housing | Addresses lower-income housing needs |
| Build-to-Rent Incentives | Tax concessions for rental housing development | Potentially increases rental supply |
| Fast-Track Planning Reforms | Streamlined approval processes | Reduced construction delays |
| First Home Super Saver Scheme | Use superannuation for deposit | Helps first buyers accumulate deposits faster |
What are economists and major banks forecasting for property values in the short and medium term?
Major Australian banks and economists predict continued house price growth of 4-6% annually through 2025 and 2026.
Brisbane, Perth, and Adelaide are expected to lead growth among capital cities, while Sydney and Melbourne face more moderate increases due to affordability constraints. Regional markets are forecast to maintain their outperformance with continued strong growth rates.
Unit prices may rise faster than houses in some markets as buyers and investors seek more affordable entry points. This shift reflects changing preferences driven by affordability pressures rather than lifestyle choices.
Medium-term forecasts remain cautiously optimistic, with most economists expecting the supply-demand imbalance to support values, though growth rates may moderate from current levels as affordability reaches critical limits.
How is affordability trending—what share of income are households now spending on mortgages or rent?
Housing affordability in Australia remains at crisis levels despite recent interest rate cuts providing modest relief.
Median mortgage repayments now consume approximately 48% of family income nationally, down from 50% in late 2024 following rate cuts. However, this remains well above sustainable levels and historical norms of 25-30%.
Rental affordability shows median rent payments consuming 24.5% of household income nationally, though this varies significantly by location with Sydney and Melbourne tenants facing higher burdens.
Very few suburbs remain accessible to households earning median incomes, with most capital city purchases requiring household incomes exceeding $200,000 annually. This has effectively priced out middle-income earners from homeownership in major cities.
It's something we develop in our Australia property pack.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What's the investor sentiment like—are investors buying, holding, or selling more right now?
Investor sentiment has rebounded significantly following recent interest rate cuts, with a noticeable surge in investment activity particularly in Sydney and inner-city markets.
Most investors are adopting a "buy or hold" strategy rather than selling, indicating confidence in medium-term value growth. The combination of lower borrowing costs and tight rental markets is attracting investors seeking both capital growth and strong rental yields.
Commercial property investment is also recovering, led by Sydney's commercial market showing renewed investor interest. This broader investment recovery suggests confidence extends beyond residential markets.
Foreign investment interest is returning, particularly from Asian investors attracted by the relative stability of Australian property markets compared to regional alternatives.
How do employment levels and wage growth tie into the property market outlook?
Australia maintains relatively low unemployment rates, providing a stable foundation for housing market demand and mortgage serviceability.
However, wage growth has failed to keep pace with house price increases, contributing to worsening affordability. While employment remains strong, per-capita income growth is under pressure from high migration levels and productivity challenges.
The disconnect between wage growth and housing costs means that even employed households are finding it increasingly difficult to enter the property market or upgrade their housing. This creates a bottleneck where demand exists but purchasing power is constrained.
Future property market performance will depend heavily on whether wage growth can accelerate to restore some balance with housing costs, though current trends suggest this gap will persist in the near term.
What risks could derail the market—like global economic shocks, inflation, or a slowdown in China?
Several significant risks could disrupt Australia's property market outlook over the next 12-24 months.
- Global economic shocks: A US recession or major global financial crisis could undermine employment and investor confidence, cooling demand rapidly
- China economic slowdown: Reduced Chinese investment and trade could impact Australian employment and foreign buyer demand
- Domestic inflation resurgence: If inflation rebounds, the RBA may need to raise rates again, reversing recent affordability improvements
- Supply bottleneck worsening: Further construction delays or labor shortages could exacerbate the housing shortage
- Migration policy changes: Sudden migration restrictions could reduce demand but might come too late to address current shortages
The most immediate risk is inflation forcing interest rate increases, which could quickly reverse recent market gains and severely impact affordability. However, most economists consider gradual rate cuts more likely given current economic conditions.
It's something we develop in our Australia property pack.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Australia's property market outlook for late 2025 and into 2026 shows continued growth supported by supply shortages, strong migration, and accommodative monetary policy.
While Brisbane leads capital city growth and regional markets outperform overall, severe affordability challenges persist across all markets, making property investment more attractive than homeownership for many Australians.
Sources
- OpenAgent - Sydney Property Market
- OpenAgent - Brisbane Property Market
- Real Estate Australia - PropTrack Home Price Index
- Smart Property Investment - Vacancy Rates Report
- Real Estate Australia - Salary Requirements Report
- InvestorKit - RBA Rate Cut Analysis
- Commonwealth Bank - Home Prices Report
- National Housing Supply and Affordability Council - Report
- Australian Treasury - National Housing Plan
- Housing Australia - Home Guarantee Scheme