Property prices make biggest monthly gains in two years

Ahead of an expected wave of first home buyers entering the market, property prices have already reignited.

September’s 0.8 per cent dwelling value gains were the biggest rise in median prices since October 2023, according to Cotality data released Wednesday (1 October).

Darwin is in major boom territory with its 1.7 per cent leap over the course of the past month, while all other capitals rose sharply with regional prices not far behind.

Historically low listing volumes are fuelling the gains.

In Perth (up 1.6 per cent) and Brisbane (1.2 per cent), two of the fastest price growth cities, the number of homes for sale is stagnating.

Perth listings are 45 per cent below average, while in Brisbane they are down by 31 per cent. Darwin’s supply squeeze is even worse, with listings down by a massive 53 per cent.

Melbourne real estate prices, which have been sluggish for years, are showing signs of a recovery but the gulf between it and Sydney is still widening. The Harbour City continues to outpace its similar-sized southern counterpart, with the gap in median property values - $435,174 - now the widest since 1999.

National home prices are up 6.2 per cent over the past year, according to PropTrack, adding around $54,100 to the value of the median home, and have surged 50.6 per cent in the past five years.

Eleanor Creagh, Senior Economist, REA Group, said price growth in Sydney and Melbourne is re-accelerating, Hobart is rebounding, and Darwin is leading annual gains amid surging investor activity.

“The combination of increased borrowing capacities and lower borrowing costs, stronger buyer confidence and renewed competition is underpinning a broad uplift, while momentum is shifting.”

The chances of the market escalating at the pace of previous booms remain muted, she said.

“Although national growth has accelerated in 2025, it remains below long-run average with stretched affordability leaving limited room for prices to surge at the 20-30 per cent pace of previous booms.

“Looking ahead, this year’s series of interest rate cuts, improved sentiment and the October expansion of the Home Guarantee Scheme will add support.

“With stock on market constrained and new supply challenged, demand-side stimulus will intensify competition.

“The housing market is poised for further gains throughout spring, though the pace will vary across cities as momentum shifts,” Ms Creagh said.

More first home buyers will be able to buy with just a 5 per cent deposit from Wednesday (1 October). The expanded Home Deposit Guarantee also allows that cohort of buyers to purchase without the added cost of lenders mortgage insurance (LMI).

Tim Lawless, Cotality’s Research Director, said he expects to see higher levels of demand concentrated around the new price caps in the coming months.

“Amid already scarce supply, prospective first home buyers looking to utilise the deposit guarantee may be feeling anxious as competition among buyers picks up,” he said.

“We could see the value of houses in well-located areas, recently unlocked by the expanded caps, surpass those new price caps quite rapidly.”

As at the end of September, half of Australian suburbs had a median house value at or under the new price caps, while 93.2 per cent of suburbs had a median unit value at or under the new price caps.

But it is the disconnect between supply and demand that is generating the bulk of the thrust in the rocketing property market.

Advertised stock levels are below average across every capital city, adding to the momentum in home value growth.

Over the four weeks to 28 September, capital city listings tracked about 18 per cent below the previous five-year average, according to Cotality. Meanwhile, estimates of sales activity through the September quarter were 7.3 per cent above the previous five-year average.

Strained affordability is arguably the most significant factor keeping a lid on value growth. Based on data to June, the median national dwelling value to household income ratio was only marginally off record highs at 7.9, with Sydney recording a ratio as high as 9.6.

Units starting to close gap with houses

Australia’s apartment market is experiencing a powerful resurgence, driven by affordability pressures, shifting buyer preferences, and the promise of expanded government support, according to new research.

The analysis by Nuestar and Hotspotting reveals that 42 per cent of all property transactions nationally – 163,246 sales – were apartments in the year to August 2025, underscoring a significant shift in buyer behaviour.

And the momentum is expected to accelerate with the launch of the expanded First Home Guarantee Scheme on Wednesday.

Houses continue to outperform units, with Cotality data showing the former was up 0.9 per cent for the month, compared to 0.7 per cent for the latter. This did, however, represent a narrowing of the gap, seeing as houses are up 5.4 per cent over the past 12 months compared to just 2.9 per cent for units.

Nuestar Director of Property, Michael Wilkins, said the government scheme kicking in from now would unlock opportunity for thousands of homebuyers, particularly in urban areas where apartments offer a more affordable entry point.

“The impact will be both immediate and far-reaching with the combination of increased borrowing capacity and reduced upfront costs set to supercharge demand in the apartment sector.

“We anticipate a surge in unit sales with pent-up demand and improved affordability likely to translate into upward pressure on prices, particularly in areas where supply is constrained.”

Mortgage stress easing

Those who already own properties are seemingly in a more comfortable financial position, which may also lead to increased activity among investors.

According to Canstar, the value of home loans in arrears by 30 to 89 days dropped to 0.55 per cent of all credit outstanding in the June 2025 quarter. This is down from 0.60 per cent in the previous quarter, as cash rate cuts start to provide relief for some borrowers struggling to meet repayments. 

The latest APRA Quarterly ADI Property Exposure statistics, released yesterday, showed the value of non-performing mortgages – those overdue by 90 days or more or impaired – also fell to 1.07 per cent in the June quarter, down from 1.08 per cent in the previous quarter, as a proportion of all outstanding loans. 

The APRA figures also show the total value of new loans grew by $33 billion in the June quarter (+21.3 per cent) to $187.6 billion, the highest level on record.

Canstar.com.au Data Insights Director, Sally Tindall, said rate cuts are giving some households just enough breathing room to get back on top of their repayments.

“It’s a welcome reprieve, but it doesn’t mean the mortgage pain is over.

“It’s encouraging to see arrears heading in the right direction, but many borrowers aren’t out of the woods yet. 

“For the average owner occupier with a $600,000 debt at the start of the hikes, their minimum monthly repayments will have dropped by around $272.

“This kind of relief will help fix up cracks in a budget that’s bursting at the seams but it won’t leave them with a windfall. 

“The drop in arrears this quarter might be minor, down from 0.60 per cent to 0.55 per cent as a share of all lending, but behind these figures are households trying to keep the roof over their heads.

“It serves as a good reminder that while some borrowers are bouncing back, a small proportion are still falling behind.”