As 2025 draws to a close, it’s safe to say it’s been another eventful year for Australia’s property market. Here’s a recap of the key moments that shaped the year — and what buyers and investors can look forward to in 2026.
The Reserve Bank of Australia (RBA) kicked off the year with a rate cut in February, reducing the cash rate by 0.25% to 4.10%.
After holding steady in April, borrowers enjoyed another rate cut in May, bringing the rate down to 3.85%.
The final cut arrived in August, when the RBA lowered the cash rate again to 3.60%, where it has remained since.
Inflation proved to be a moving target throughout 2025. It began the year at 2.4% in the March quarter before easing to 2.1% by June — signalling early optimism.
But that optimism faded by September as inflation rose to 3.2%. CPI jumped 1.3% for the quarter, the sharpest increase since March 2023.
In October, inflation climbed again to 3.8%, intensifying pressure on households and influencing policy decisions.
With the RBA aiming for a 2–3% target range, these increases have kept economic conditions tight.
Australian property prices climbed sharply in 2025, supported by rate cuts, limited housing supply and government incentives.
By October, home values were rising at the fastest monthly pace in more than two years, increasing 1.1% across the country, according to Cotality. This pushed annual growth to 6.1%.
November continued the trend with a 1% national increase, lifting year-to-date growth to 7.7%.
Overall, dwelling values are expected to end the year at least 8% higher, with Darwin, Brisbane and Perth leading the charge ahead of Sydney and Melbourne.
Several major government programs reshaped the 2025 market.
In October, the new 5% Home Guarantee Deposit Scheme launched, replacing the previous Home Guarantee Scheme. It removed income caps, lifted property price caps and made the scheme unlimited for eligible first-home buyers with a 5% deposit.
Then on 5 December, the Help to Buy Scheme commenced, offering 10,000 places each year. Buyers can enter the market with as little as a 2% deposit, with the Government contributing up to 30% of the purchase price for existing homes or 40% for new builds. (Property price and income caps still apply.)
Renters felt the pressure this year. The median weekly rent across combined capital cities has now reached $702, making affordability a growing concern for tenants.
Regional markets, however, remain more affordable, with rents still below $600 a week.
The latest inflation data has reshaped expectations for the coming year. Most economists now anticipate the cash rate will remain at 3.60% for an extended period.
Some forecasts still point to possible cuts — potentially down to 3.35% by June 2026 and 3.1% by September — but this will largely depend on inflation trends.
From 1 February 2026, the Australian Prudential Regulatory Authority (APRA) will introduce a 20% cap on loans with debt-to-income ratios of six or more, with separate limits for owner-occupiers and investors.
This may make borrowing more challenging for higher-risk applicants when lenders approach their cap, although most borrowers are currently well below this limit.
Cotality expects softer conditions in 2026 as borrowing capacity, tighter credit assessments and affordability constraints begin to influence demand.
National property listings are still 18% below the five-year average, keeping supply tight.
According to Cotality Australia’s Head of Research, Eliza Owen, rising inflation expectations and stricter borrowing assessments could temper buyer activity, even with limited stock.
Lower-priced markets may show more resilience due to reduced sensitivity to credit constraints, but overall market growth is expected to be more moderate compared with 2025.
Together, these factors suggest the property market is entering a more cautious phase — one where opportunities still exist, but strategic planning will be key.
Ready to review your finance plans?
After a year of shifting conditions, 2026 could bring new possibilities for refinancing, purchasing or investing. Staying informed and financially prepared will help you make the most of them.
If you’d like to explore your plans for 2026 and understand the finance options available, get in touch today.
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