September 2025
Australian home prices saw growth rates accelerate in August, on the back of strong demand driven by rate cuts and growth in real wages.
Further gains in home values are expected, as supply remains constrained by high costs and ailing productivity in the construction sector.
Home price growth rises to highest level in over a year
Cotality’s Home Value Index posted an increase of 0.7 percent in August, for the largest monthly rise since May 2024. The annual change in Australian dwelling prices has lifted to 4.1 percent as a result.
Tim Lawless, Cotality Australia’s research director, pointed to demand continuing to outpace supply as the primary driver of nationwide housing price gains.
“Once again we are seeing a clear mismatch between available supply and demonstrated demand placing upwards pressure on housing values,” Lawless said.
“The annual trend in estimated home sales is up two percent on last year and tracking almost four percent above the previous five-year average. At the same time, advertised supply levels remain about 20 percent below average for this time of the year.”
The momentum generated by the Reserve Bank of Australia’s (RBA) current cycle of rate cuts has played a critical role in boosting demand.
The RBA made its third cut to the target rate in 2025 at its August meeting, with a 0.25 percentage point reduction that took the cash rate to 3.6 pecent – its lowest level since April 2023.
Other factors contributing to stronger demand from buyers include growth in real wages, mounting confidence, as well as a keen sense of urgency over the tightness of advertised levels.
Construction costs mount as productivity dwindles
The still heady costs for the construction of new residential properties are also contributing to strong growth in Australian dwelling values.
Altus Group’s Q2 2025 Australian Construction Price Outlook found that Australia’s locally intensive inputs have continued to climb in cost as a result of labour and delivery pressures. These inputs include key construction materials such as concrete, bricks and plasterboard.
The Altus report said that long-term ailing productivity is also a key contributor to the onerous cost of materials and new home builds.
According to the Productivity Commission’s findings from earlier this year, the number of dwellings completed per hour by housing construction workers has fallen by 53 percent over the past three decades.
“We are working more hours, paying more and delivering less,” wrote Niall McSweeney and Cody Bui, authors of the Altus report.
“That shows up in material costs…international prices are softening, yet locally intensive inputs keep rising.”
Output prices for building construction saw a 0.7 percent rise in the June quarter, driven more by labour-led pricing and capacity constraints than materials.
McSweeney and Bui said the only way to deal with the issue is to drive meaningful gains in Australia’s construction sector productivity.
“International material prices can fall, but if projects run longer and consume more labour per unit of output, locally intensive materials will stay high.”
SME developer margins under pressure
CrowdProperty CEO David Ingram said that while the national headlines highlight strong price growth, SME developers are navigating a far tougher environment.
“Land and construction costs remain elevated, and productivity challenges across the sector continue to erode margins,” Ingram said.
“For SME developers — who play a vital role in delivering the diverse, small- to mid-scale projects Australia needs — access to competitively priced capital is absolutely critical. As our SME Developer Survey showed earlier this year, developers face land and new site acquisition cost challenges and margins are being squeezed like never before. Unless the cost of funds comes down, many otherwise viable projects won’t proceed, and the supply gap will only widen.”
Brian Cullen, Property Director at CrowdProperty, said experienced developers are finding it increasingly difficult to make projects stack up.
“Rate cuts may be fuelling demand, but rising input costs and falling productivity mean every basis point in funding costs makes a real difference to whether a project goes ahead,” Cullen said.
“We’re seeing very strong appetite from quality SME developers, particularly in the $5–15 million project range, but the reality is that margins are razor thin. Without access to fair and efficient finance, these projects stall.”
Housing prices set to rise further on strong demand
John Lindeman, CEO, Property Power Partners, expects Australia’s nationwide dwelling values to continue to rise on the back of strong demand driven by multiple factors, including the RBA’s rate cuts and the federal government’s property policies.
“The recent and further expected interest rate falls plus the bringing forward of the Federal Government’s First Home Saver Guarantee Scheme are likely to generate more buyer demand in virtually all locations, especially first home buyer suburbs in capital and major regional cities,” Lindeman said.
“These locations are likely to experience the biggest lift in demand and strong price growth in the most affordable suburbs.”
Lindeman expects this rise in first home-buyer demand to then spill-over and have a slow burn impact on other segments of the market.
“This will lead to an increase in buyer demand for upgrader suburbs over the next few years, especially in Sydney and Melbourne,” he said. Much of this will occur as recent first home buyers decide to upgrade, so the effect on prices will be less and take longer.
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August 2025
Australia’s housing market managed to rack up its sixth consecutive month of price gains in July, despite the Reserve Bank of Australia (RBA) shock decision to put a pause on rate cuts.
Further reductions to interest rates are viewed as inevitable, however, and are set to drive a rise in dwelling values, given ongoing failure to expand housing supply despite the federal government’s ambitious targets.
Home price growth maintains momentum in July
National dwelling values posted a 0.6 percent rise in July, bringing the current cycle of price gains to its sixth consecutive month, according to figures from Cotality.
Price movements for the Australian housing market first turned a corner in February, when the Reserve Bank of Australia (RBA) kicked off its current cycle of interest rate cuts.
The RBA’s shock decision to hold off on a rate cut in July didn’t put a dent in the steady momentum of home price gains. The rate of nationwide price growth in July was on par with gains for the preceding two months, with all of Australia’s capital cities posting increases.
Darwin led the pack with an on-month rise of 2.2 percent, while Hobart came in last, with housing prices in the Tasmanian capital edging higher by just 0.1 percent.
Sydney saw its dwelling values rise 0.6 percent, while in Melbourne they rose 0.4%.
Tim Lawless, Cotality’s research director, said nationwide home price growth received a boost from a combination of low supply and declining interest rates, which help to drive a rise in confidence. This helped to overcome the headwinds of affordability constraints and ongoing uncertainty.
Lack of supply is evidenced by the fact that national listings are tracking -19% beneath the previous five-year average for this time of year.
Demand is comparatively robust, however, with Cotality estimating that annual sales are tracking around 1.9% above the previous five-year average.
August rate cut
The Reserve Bank’s decision to cut the cash rate by 25 basis points to 3.60 percent will add further momentum to housing demand already underpinned by low supply. While cheaper borrowing will improve project feasibility for developers — particularly SMEs — the benefits risk being offset by rising land prices, labour shortages and slow approvals. Without addressing these supply-side constraints, the uplift in demand from lower rates may simply put more upward pressure on prices rather than delivering the volume of new homes needed.
While welcoming the latest rate cut, CrowdProperty CEO David Ingram said the interest rate was only part of the solution to more home construction.
“Our latest SME developer survey shows that rising land costs have now overtaken finance as the number one barrier for small-scale developers,” Ingram said.
“62.5 percent of respondents ranked it in their top three challenges, nearly double the proportion from two years ago. With listings almost 20 percent below average, these cost pressures are choking the supply of the very infill housing our cities urgently need,” he said.
“The RBA’s August rate cut will help on the finance side, but it’s only part of the solution. Cheaper money doesn’t make land any less expensive or approvals any faster. We need targeted policy and funding measures that enable SME developers to compete for sites and bring projects to market more quickly.
“SME developers are the backbone of Australia’s infill housing supply. They’re agile, able to deliver in well-located areas, and they can scale up quickly if given access to affordable sites, planning certainty, and fit-for-purpose finance. Without unblocking these constraints, even a supportive interest rate environment will leave us short of housing targets.”
Leading economists point out that supply growth continues to disappoint, despite the National Housing accord target of building 1.2 million new well-located homes by the end of the decade.
HIA senior economist Tom Devitt highlights the gap between the demand about to come online as a result of rate cuts and the laggard condition of building starts.
“Interest rate cuts from the Reserve Bank in February and May this year, and now August, will help bring more potential homebuyers back to the market in the lagging – and often more expensive – states and territories,” Devitt said.
“Even with lower interest rates, Australia is set to start just 200,000 homes per year, on average, over the next four years.”
“Multi-unit activity, in particular, needs to do more heavy lifting. Multi-unit commencements need to double from current levels in order to achieve the government’s housing targets.”
John Lindeman, CEO, Property Power Partners, highlights the role of inflation and insufficient labour supply in holding back efforts to expand housing volume.
“The key issue is that we are simply not building enough new homes,” Lindeman said.
“Australia needs around 270,000 new dwellings a year to meet population demand.”
“Treasury has revealed, however, that construction costs, tradie shortages and the complexity of development approval processes mean that the Federal Government will not meet its (already inadequate) Housing Accord target of 240,000 annual completions without a substantial lift in funding.”
“Similar to other government initiated housing schemes, this is increasingly looking like another window dressing stunt.”
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Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Cache.
July 2025
Australia’s home values saw accelerated gains in the second quarter on the back of long-awaited interest rate cuts. Property observers foresee further gains in home prices driven by further RBA rate cuts, as well as housing support policies put in place at both national and local levels.
Home value growth gathers momentum
The Australian housing market extended its streak of price gains to a fifth consecutive month in June. Dwelling values lifted 0.6 per cent according to figures from Cotality, with monthly increases posted across every region of Australia, except Hobart which saw a 0.2% decline.
National home values rose 1.4% in the June quarter (Q2 2025), accelerating from a 0.9% increase in Q1 2025. This follows a 0.1% decline in Q4 2024.
PropTrack data indicates that national house prices hit a record high before the close of the last financial year, and are now on average $40,900 higher than they were a year previously, in a major affordability blow for first-time home buyers.
The two rate cuts posted by the Reserve Bank of Australia (RBA) in the first half of 2025 played a pivotal role in the recovery then acceleration of growth in nationwide housing prices.
Cotality’s research director, Tim Lawless, says the long-awaited moves from the RBA and its pivot towards a dovish monetary policy stance are an inflexion point for the performance of Australia’s housing market.
“The first rate cut in February was a clear turning point for housing value trends. An additional cut in May, and growing certainty of more cuts later in the year have further fuelled positive housing sentiment, pushing values higher,” Lawless said.
Lawless also pointed to low levels of advertised stock, tracking -5.8 percent below the same time a year ago.
More RBA cuts anticipated
Economists foresee further cuts from the RBA, as Australia grapples with the market uncertainty created by Trump’s mercurial tariff war and strife in the Middle East.
AMP chief economist Shane Oliver expects the RBA to cut interest rates by 25 basis points in July, August and November of this year, before cutting again in February 2026. The move will drag the cash rate down to 2.85 per cent, providing a boost to home prices.
REA senior economist Eleanor Creagh shares Oliver’s opinion, pointing to building market momentum as buyers anticipate another rate cut in July. Despite worsening affordability, Creagh expects further interest rate cuts in 2025 to provide further support to ongoing price growth with lower borrowing costs.
Rise in buyer demand to drive price growth
John Lindeman, CEO, Property Power Partners told CrowdProperty that these interest rate cuts in tandem with secular growth in demand and local support policies are on track to boost home values around Australia.
“The recent and further expected interest rate falls plus the Federal Government’s first home buyer initiatives are now combining with state government stamp duty concessions for first home buyers to increase the number of property buyers, as well as the amounts they can borrow,” Lindeman said.
“However, recent upticks in buyer demand are largely an expression of confidence, rather than the actual effects of interest rate cuts and government initiatives – although this will change in coming months.”
Rob Flux, educator and developer at the Property Developer Network, also foresees a mounting market recovery on the back of rate cuts and the government’s homebuyer support initiatives.
“We’re starting to see the market pick up all the way around the country, with interest rates dropping and early signs of more rate drops to come,” Flux said.
“With the federal government stipulating the five percent deposit for first home owners and other states giving home owner grants, we’re going to see more activity in terms of buyers coming back to the market.”
Lindeman sees variable trends in prices depending on the types of buyers attracted to different market locations.
“First home buyer markets will experience the biggest lift in demand, and prices are expected to rise in many of the lowest priced suburbs in our major cities,” he said.
“There will also be an increase in buyer demand for upgrader suburbs, but much of this will occur as recent first home buyers decide to upgrade, so the effect on prices will be less and take longer.”
Limited supply of new affordable apartments
The current limited supply of affordable housing in the market is significantly distorting pricing trends. Recent data from Ray White reveals a striking shift: units are now outperforming houses in Adelaide, Perth, and Brisbane, largely due to chronic undersupply.
Developers have increasingly focused on luxury projects aimed at downsizers, driven by rising land and construction costs. Unfortunately, this trend creates a cycle where affordable housing options dwindle, leading to heightened competition for the few existing units driving prices up.
At CrowdProperty, we recognise the urgency of this situation. We are dedicated to supporting developers in building more homes to help address this supply crisis. As David Ingram, CEO of CrowdProperty, emphasises, tackling this issue is essential for sustainable growth in the market.
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Cache.
