Values rise across the board as the housing cycle gains momentum

Australian property prices continued their upward trajectory in July, with national prices rising by 0.6%. This marked the sixth consecutive month of gains. The steady growth suggests the market has found a comfortable rhythm, aided by declining interest rate expectations, tight housing supply and improving buyer sentiment.

National growth holds steady

The latest data from CoreLogic’s Home Value Index confirms that housing values have maintained consistent month-on-month growth since May, despite affordability constraints and economic uncertainty. July’s increase matches the 0.6% gains recorded in both May and June, pointing to a stabilised growth phase rather than an overheated market.

Every capital city posted an increase in July, led by Darwin’s standout performance with a 2.2% monthly increase. Perth followed with a 0.9% rise, while Brisbane and Adelaide each saw values climb by 0.7%. At the other end of the scale, Hobart (0.1%), Melbourne (0.4%) and Canberra (0.5%) posted more modest results. Sydney, meanwhile, matched the national average at 0.6%.

While Darwin’s influence on the national average is relatively small, its 9.7% price growth over the first seven months of 2025 signals a strong local recovery. Perth’s momentum has also accelerated, marking its fastest rate of growth since September last year.

Demand outpaces supply

Low inventory levels continue to underpin price increases. Listings nationally are tracking about 19% below the five-year average, while sales volumes are 1.9% above average. This imbalance has kept auction clearance rates buoyant since mid-May and helped drive the current phase of value increases.

Meanwhile, houses are outperforming units in value growth. Over the past three months, house prices rose by 1.9% compared with a 1.4% gain in unit values. That equates to a $16,700 increase in median house value nationally, versus just $9,700 for units. This gap continues to widen due to buyer preferences for detached housing, combined with a lack of new multi-unit supply and affordability constraints.

The price gap between houses and units has now reached a record high, with house values sitting 32.3% higher than units. This equates to approximately $223,000 in dollar terms.

Regional markets lose their edge

Combined regional markets posted a 0.6% gain for the month, in line with capital cities, but their rolling quarterly performance of 1.7% has now slipped behind the combined capitals at 1.8%. This marks a reversal from the trend seen over the past nine months, where regional areas had consistently outperformed their metropolitan counterparts.

Despite the broader strength across capital city markets, some cities remain more subdued over the year. Melbourne and Canberra recorded just 0.5% annual growth, while Hobart edged up 1.9%. In contrast, Brisbane and Darwin are leading on an annual basis, with values up 7.3% and 9.7% respectively.

Rental pressure building

Rental markets remain tight, with national vacancy rates holding at a historic low of 1.7% in July. This has helped reaccelerate rent growth, particularly in the unit sector. Over the past three months, unit rents rose 1.3% on a seasonally adjusted basis, while house rents lifted by 1.1%.

Darwin recorded the sharpest rental increases, with unit rents rising 2.9% and house rents up 2.2% over the same period. Hobart also saw strong rental growth, with houses up 2.0%. Melbourne and Adelaide remain the weakest performers, with house rents in Melbourne lifting just 0.1% and Adelaide units up 0.4%.

Gross rental yields have softened slightly, dropping to 3.68% nationally in July, down from 3.71% in April. Darwin remains the most attractive city for rental yields at 6.4%, reflecting its relatively low dwelling values and strong rent levels.

Looking ahead

The outlook for housing remains positive, with further gains expected through the rest of the year. The combination of lower inflation, anticipated interest rate cuts, and tight housing supply is expected to support continued, albeit modest, growth in dwelling values.

However, several headwinds remain. Housing affordability continues to be the most significant constraint on price growth, with the national dwelling value to income ratio sitting just below record highs at 7.9. High household debt levels are also drawing scrutiny from financial regulators, who remain alert to any signs of unsustainable borrowing behaviour.