Cotality’s Home Value Index (HVI) shows a 1% rise in national home values, marking a slight slowdown from October’s 1.1% gain.

Perth leads with a 2.4% surge in values this November, while Sydney and Melbourne post more modest gains of 0.5% and 0.3%, respectively.

Cotality research director Tim Lawless noted that the gap between rising home values in mid-sized capitals and slower growth in larger cities has re-emerged, echoing trends from late 2023 and 2024.

“The skew towards the mid-sized capitals is especially evident in Perth, where listings are holding more than 40% below average, buyer demand is elevated, and the 2.4% monthly rise in dwelling values has added just over $21,000 to the median in November, roughly $5,000/week,” he said.

Big-city housing growth slows as affordability bites

Housing growth is slowing in Australia’s biggest cities. Affordability pressures appear to be limiting further gains, while Sydney’s housing supply remains relatively balanced - listings are only 2.2% below the five-year average. 

By comparison, other capital cities are experiencing tighter markets, with overall listings about 16% below their long-term norms. After a strong spring, Sydney’s monthly growth seems to have peaked in August at 0.9%.

Auction clearance rates in both Sydney and Melbourne have also eased, holding in the low 60% range. High prices are putting pressure on buyers, with the national median home now costing 8.2 times the average household income and mortgages taking up 45% of income. 

Growth is happening mostly at the lower end of the market, except in Melbourne, where the middle of the market is seeing the fastest increases.

Will inflation and steady rates hit home prices?

Rising inflation and the expectation that interest rates will remain steady are set to weigh on Australia’s housing market, according to Cotality research director Tim Lawless. 

“With housing affordability already stretched and worsening, it stands to reason that fewer borrowers will be able to access credit as serviceability barriers become more prominent,” he added.

Meanwhile, the impacts of APRA’s new policy limiting high debt-to-income (DTI) ratio loans to 20% of new lending are expected to be modest. 

“This new credit policy won't be implemented until February next year, but even then, it's likely to only affect the margins of borrowing activity,” Lawless said, noting that the most recent mortgage originations remain well below a debt-to-income of six or more.

Rental market remains tight

Australia’s rental market is showing no signs of easing, with vacancy rates holding near record lows at 1.5% nationally - down from 1.9% a year ago. 

Anything below 2% is considered incredibly tight.

Low supply is pushing rents higher, with the national rental index up 0.5% in November and 5.0% over the past 12 months, marking the fastest annual growth since last year.

Rents are rising across every capital city, led by Darwin and Hobart, while Melbourne, Canberra, and Adelaide have seen more modest increases. Most of the growth is concentrated in apartments, where median rents are generally lower.