Australian home prices rose again in November, driven by this year’s interest rate cuts, the expanded 5% first home buyer deposit scheme, and ongoing housing shortages. All capital cities recorded price increases, though the pace of growth slowed slightly.

Key Points

CoreLogic data shows national home prices rose 1.0% month-on-month in November, down from 1.1% in October.
Annual rental growth has accelerated to 5% year-on-year, supported by near-record low vacancy rates.
Continued effects of interest rate cuts, housing policy support, and constrained supply are expected to lift home prices in 2026.
However, growth will likely slow due to worsening affordability, potential rate hikes, and stricter lending controls.
After an estimated 8.5% rise in 2025, price growth is forecast to moderate to 5–7% in 2026.

November Market Trends
National home prices continued their upward trend in November, though gains slowed slightly. Perth, Brisbane, and Adelaide remained strong, while Sydney and Melbourne showed signs of cooling. Affordability constraints and increased listings likely contributed to softer conditions in Sydney and Melbourne.

Annual price growth has now reached 7.5%, above the decade average of 5.4%.

Drivers of 2025 Price Growth
The stronger-than-expected housing market this year—outpacing the 3% growth initially forecast—reflects:

Interest Rate Cuts: Three RBA cuts in 2025 boosted borrowing capacity and buyer demand. Each 0.25% cut adds approximately $11,000 to the average borrowing capacity, though median home prices have risen around $90,000 since January.
Government Schemes: The expanded 5% deposit scheme (brought forward to October 2025) and the launch of the Help to Buy program (10,000 annual places, with 30–40% government equity) have boosted first-home buyer demand.
Housing Shortages: Despite some easing in population growth and improving housing completions, an estimated shortfall of 200,000–300,000 dwellings persists.
Vendor Behavior: Low listings, driven by vendor reluctance and reduced pressure on distressed sellers, further tightened supply.

Auction clearance rates in Sydney and Melbourne rose earlier in the year but have since softened, possibly reflecting affordability pressures.

Outlook for 2026
While upward momentum is expected to continue, several factors point to slower growth ahead:

Interest Rates: The RBA appears near the bottom of the rate cycle. Although another cut is possible if inflation falls below target and unemployment rises, recent data suggests a rate hike is more plausible by late 2026 or 2027. This would limit borrowing power compared to 2021–22 levels.
APRA Lending Controls: From February, banks must limit lending with debt-to-income (DTI) ratios above six to 20% of total housing loans. This will mostly impact investors and some first-home buyers. Investor lending already exceeds 10% growth year-on-year, raising the likelihood of further APRA action.
Affordability Pressures: Home price-to-income ratios are at record highs. While many buyers stretch affordability with family support and government programs, rising prices could begin to cap demand.
Slower Population Growth: Student visa restrictions and a return to normal student departure rates are slowing migration. Population growth has already dropped from 662,000 to 423,000 and is forecast to fall to 365,000 in 2025–26.

City-Level Trends
Brisbane, Perth, and Adelaide—where FOMO remains high—are likely to outperform in the near term. However, as affordability deteriorates, a rotation back toward lagging markets like Melbourne, Sydney, Hobart, Darwin, and Canberra is probable later in 2026.

Risks to Watch
Key variables to monitor include:

Interest rate moves (cuts vs. hikes)
Unemployment trends
Migration and population growth

A sharper-than-expected rise in rates or unemployment—or a slump in migration—could reverse gains. Conversely, faster rate cuts or population growth could re-accelerate price growth.

Rick Maggi, Financial Advisor (Perth), Westmount Financial