Australian housing prices hit a new record high in June, marking the fifth consecutive month of growth. This upward trend is largely being fueled by recent interest rate cuts from the Reserve Bank of Australia (RBA), boosting market confidence despite ongoing affordability challenges.
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Key Takeaways:
- National dwelling values rose 0.6% in June, reaching a new peak.
- Capital cities are now leading growth over regional markets.
- Lower interest rates are the primary driver of the current upswing.
- Affordability constraints continue to limit the pace of growth.
- Rent growth is slowing, offering some relief to tenants.
Home Values Climb Following RBA Cuts
The latest data from property research firm Cotality shows national dwelling values increased by 0.6 per cent in June, following a brief dip over the summer. This marks the fifth straight month of growth, pushing values past their previous peak.
Most capital cities saw values rise in June, with Hobart being the exception, recording a slight fall of 0.2 per cent. A shift is also occurring between markets, with major cities now showing a higher growth rate compared to regional areas, which had previously led the charge.
Data from REA Group’s PropTrack also confirms housing prices are at historic highs. Adelaide stands out with the strongest monthly rise at 0.5 per cent, contributing to an impressive nearly 10 per cent increase over the past year.
REA senior economist Eleanor Creagh noted, “So far this year, the capital city markets are leading the charge.”
Property economist Eleanor Creagh discussing housing market trends
Tim Lawless, the head of research at Cotality, attributes the current growth squarely to monetary policy. “The biggest factor here absolutely is lower interest rates,” he explained, adding, “I don’t think it’s a coincidence we started to see housing values rising after a brief downturn in February.”
The Reserve Bank cut interest rates for the first time in nearly five years in February, followed by a second cut in May 2025, bringing the cash rate below 4 per cent. These cuts reduce borrowing costs and increase buyer capacity and confidence.
Growth Varies Across Cities
While the national trend is positive, growth isn’t uniform. Darwin recorded the strongest monthly house price growth at 1.5 per cent in June. Mr Lawless highlighted the relative affordability of investing in Darwin compared to other major centres as a key factor.
“I think the growth trend we’re seeing now, which is evident over the past 12 months, is really being fuelled by this renewed level of investment activity coming into the Darwin marketplace and just the sheer affordability,” Mr Lawless said.
Tim Lawless from Cotality explaining factors influencing housing prices
With a median dwelling value around $540,000, Darwin is significantly more accessible than many other capital cities. High rental yields also incentivise investors, potentially encouraging some renters to consider purchasing at more affordable price points.
Many markets, including Perth, Adelaide, and Brisbane, are at or near record highs and have seen substantial growth over the past five years (over 70 per cent in these cities). However, Mr Lawless noted that the pace of growth nationally is not as rapid as seen in previous cycles. “If you go back, say, a couple of years, the rate of growth was about double what it is at the moment,” he observed.
Affordability Remains a ‘Handbrake’
Despite the tailwind from lower interest rates, affordability challenges are preventing the market from accelerating even faster.
“It’s fair to say that there’s still a lot of constraints in housing markets, particularly affordability constraints, that are holding back a higher level of growth as we do see interest rates coming down,” Mr Lawless explained.
REA’s Eleanor Creagh agrees, stating, “Stretched affordability is putting a bit of a handbrake on home price growth… we’re seeing a more gradual pace of home price growth compared to previous easing cycles.” She pointed out that household income growth has not kept pace with the sustained rise in home prices seen in recent years.
Cotality’s report notes that the 2.4 per cent rise in national dwelling values in the first half of the year equates to an approximate $19,000 increase in the median value. This significant jump erodes much of the benefit lower rates offer in terms of borrowing capacity, creating a paradox where reduced borrowing costs are outweighed by rapidly increasing asset values.
Other factors limiting growth potential include elevated household debt levels, slower population and migration growth, cautious bank lending policies, and even global uncertainties like geopolitical risks.
Aerial view of buildings in Darwin, highlighted for its relatively affordable housing market
Relief for Renters, But Affordability Drives Household Change
For renters, there is some positive news: the pace of rent growth is slowing. Mr Lawless described it as “an ongoing slowdown,” with national rents rising just 3.4 per cent over the past 12 months – the slowest annual rate since early 2021.
“Finally, a little bit of relief coming through for renters,” he commented. However, he clarified this doesn’t mean rents are falling, but rather that they are not increasing as quickly as they have over the last five years.
The persistent lack of affordable housing, both for buying and renting, is leading to notable shifts in how households are structured. Mr Lawless noted a resurgence in share houses and multi-generational households.
This trend is particularly evident in the largest capital cities, Sydney and Melbourne, especially in the apartment markets. Reduced demand from net overseas migration, coupled with rental affordability pressures, is forcing this restructuring. “We’re seeing more group households reforming, multi-generational households are becoming more common as well, which I think is a clear reflection of rental affordability just driving this ongoing change in how people actually form a rental household,” Mr Lawless stated.
Outlook: Modest Growth Ahead
Looking ahead, the consensus suggests a continued period of price growth, albeit at a modest pace, for the remainder of 2025. While falling interest rates provide support, the significant hurdle of housing affordability is expected to keep a lid on rapid appreciation seen in previous boom cycles.
For further insights into the Australian property market and economic trends, explore our related articles.
