Market Update — Monday, 8 December 2025

Headline summary

Australia’s housing market is increasingly operating at different speeds across the states. November’s national result — another month of roughly 1% home value growth — masks widening divergence between markets such as Perth and Adelaide, which continue to outperform, and Sydney and Melbourne, where growth is more subdued. Rental conditions remain tight overall, though pressure varies significantly by region. Investor activity continues to strengthen but is clustering in high-demand, yield-resilient states.

National overview (prices and auctions)

Cotality’s November Home Value Index shows national dwelling values rose around 1.0% in the month, extending the spring upswing but with meaningful variation beneath the headline. Perth again led the country, supported by strong population growth, tight market depth and limited new supply. Adelaide also recorded firm results, reflecting ongoing affordability advantages compared with the eastern capitals.

Sydney and Melbourne, by contrast, saw more modest outcomes. Both cities experienced positive but slower growth as affordability constraints, higher household leverage and cautious buyer sentiment moderated price momentum. Brisbane continues to sit between these extremes, with pockets of strong demand — particularly in family-oriented suburbs — but also areas where stretched affordability is limiting competition. Auction clearance rates across the capitals softened slightly heading into December, consistent with seasonal slowing and greater buyer selectivity.

Rentals (vacancy, rents and yields)

Rental conditions remain broadly tight, but the intensity differs meaningfully by state. SQM Research data indicates sub-1% vacancy in Perth and Adelaide, driven by structural undersupply and sustained migration flows. Brisbane’s vacancy has lifted only marginally, still well under the levels seen before 2020, while parts of regional Queensland remain exceptionally constrained.

Sydney and Melbourne are showing a more mixed picture. Vacancy is still low in many suburban locations, but inner-city apartment markets have seen a mild easing as new supply reaches completion and tenant demand normalises. Advertised rents nationally remain up around mid-single digits annually, though the strongest increases continue to occur in states where vacancy remains below 1%.

Lending and investor activity

Investor lending continues to rise, with the latest ABS Lending Indicators showing investors now account for close to 40% of all new housing finance. View source. But similar to the price data, this activity is not evenly distributed. Western Australia, South Australia and Queensland are drawing a growing share of investor interest, supported by stronger rental conditions and relatively more accessible purchase prices.

In New South Wales and Victoria, investor participation has increased but at a slower pace. Higher mortgage sizes, tighter serviceability constraints and shifting yield profiles mean investors are more selective. Some are targeting townhouses or established houses with renovation potential, while others are redirecting plans interstate in search of stronger cash-flow prospects.

Risks and watch-items

• Affordability divergence: High prices in Sydney and Melbourne may restrain early-2026 demand, while more affordable capitals continue to draw both owner-occupiers and investors.
• Supply imbalance by state: WA and SA face entrenched undersupply, but some eastern markets could see more balanced conditions if listing volumes lift.
• Rental bifurcation: Suburban rents remain firm nationwide, while select inner-city pockets — especially in Melbourne — show early signs of easing.
• Interstate investor competition: Increased attention on WA, SA and QLD could compress yields over time, particularly for entry-level housing stock.

Firm Foundations Property perspective

This week’s data reinforces a theme that has steadily gained importance throughout 2025: Australia is not a single housing market, and strategy must now be state-specific. The strongest conditions are clearly in Perth and Adelaide, where price growth, rental tightness and relative affordability continue to support investor confidence. Brisbane remains constructive but more varied, requiring careful suburb selection and realistic yield expectations.

Sydney and Melbourne still present opportunities, particularly for investors with longer time horizons and the capacity to leverage cyclical value dips. However, these opportunities are highly selective and tend to be concentrated in well-established suburban pockets with strong rental appeal. Across all markets, disciplined assessment of price, rental demand and property condition is essential, as rising competition among investors narrows the margin for error.

Conclusion

Overall, November’s data highlights a market defined less by broad national trends and more by regional divergence. Investors who tailor their approach to state-level fundamentals — supply, affordability, rental tightness and demographic momentum — are better placed to navigate the current environment. As 2025 draws to a close, this two-speed dynamic appears set to carry into early 2026, reinforcing the value of selective, research-driven decision-making.