Australia’s housing market defied expectations in the face of intense affordability and cost-of-living pressures to deliver an above-average growth rate of 7.7% year-over-year.
According to Cotality’s Best of the Best report, National Dwellings are set to close 2025 at least 8% higher.
Cotality head of research, Eliza Owen, said this highlights how quickly conditions shifted after “considerable pressure” at the start of the year.
“Affordability had hit a series high, serviceability was stretched and price growth had flattened out,” Owen said.
“What followed was an unexpectedly strong rebound as interest rate cuts, easing inflation and limited supply reignited competition.”
After three rate cuts, an expansion of the 5% Home Guarantee Deposit Scheme and persistently low listing volumes helped drive recovery, the housing market recorded three consecutive months of growth of at least 1% by November, reaching a record high of A$12 trillion.
Owen said the turnaround was most visible across lower-value markets and regions where buyers were able to respond quickly to more favourable credit conditions.
“Tight supply meant even modest demand created upward pressure on prices. Cheaper markets had the most acceleration because they remained within reach for buyers navigating higher living costs,” she said.
Sydney remained Australia’s price leader, with the high-end suburbs sitting in a price bracket of their own, widening the price gap between themselves and the rest of the country.
Mosman recorded the highest total value of house sales nationally at A$1.58 billion across 229 transactions.
Point Piper had the highest median house value of A$17.3 million and unit median of A$3.1 billion.
“Affordability constraints were a defining feature of 2025, yet premium markets continued to operate on their own cycle,” Owen said.
“These suburbs are far less sensitive to borrowing costs and listing trends, which is why their performance often diverges from the broader market.”
Lower-value suburbs still delivered the greatest growth, with Western Australia leading the charge.
Kalbarri increased by 40.2% to A$515,378, followed by Rangeway and Lockyer, which rose 32.2% and 32% respectively.
Similar trends could be seen in the unit market, especially in Queensland’s mid-point regions.
Perth, Brisbane and Darwin had the greatest growth out of the capital cities, making them Australia’s top-performing capitals.
Darwin had the strongest growth of 17.1%.
However, there was uneven growth in Regional Australia due to supply levels, migration flows and localised demand according to Owen.
“Some regional areas are still benefiting from relative affordability and tight rental conditions,” she said.
“Others are adjusting to earlier periods of rapid growth or shifts in local economic activity.”
Mining towns also recorded strong yields in rental demand, especially in regional WA and parts of regional Queensland.
The report said that market conditions are expected to be more restrained in 2026, as borrowing capacity, affordability and credit assessments place limitations on demand.
National listings fell 18% below the five-year average as new housing completions continue to trail household formation.
“Supply remains tight, but the demand environment is shifting. Inflation forecasts have been revised higher, interest rate expectations have adjusted with them, and households are facing stricter borrowing assessments,” Owen said.
