Key Points
- Australian home prices rose 1% in November, but growth is slowing.
- The major markets of Sydney and Melbourne saw much smaller gains than other cities.
- Fears that interest rates will not be cut are dampening buyer sentiment. Smaller cities like Perth and Adelaide are now driving the national price growth.
- Regulators are stepping in with new rules to curb risky high-debt home loans.
Australian home prices kept climbing in November, but the red-hot markets in Sydney and Melbourne are finally starting to cool off. A new report from property consultant Cotality, released on Monday, shows that a shift in interest rate expectations is making buyers in the country’s most expensive cities more cautious.
Nationwide, home prices increased by 1% in November, bringing the total gain for the year to a strong 7.5%. The national median home value now sits at A$888,941.
However, the growth was not spread evenly. Smaller capital cities led the charge, with Perth’s prices surging 2.4% and Adelaide’s jumping 1.9%. In contrast, Sydney saw a modest 0.5% rise, while Melbourne’s prices barely moved, increasing by just 0.3%.
The slowdown comes as homebuyers face the reality that interest rate cuts are unlikely anytime soon. After a recent inflation report came in hotter than expected, the Reserve Bank of Australia is now expected to keep rates on hold for the foreseeable future. This is making people hesitant to take on massive mortgages.
“With… rates potentially on hold for the foreseeable future, it’s likely housing sentiment will suffer,” said Cotality’s research director, Tim Lawless. He added that affordability is so stretched that most market growth is now happening at lower price points.
The persistent price gains have also caught regulators’ attention. The country’s banking watchdog announced it will cap high debt-to-income home loans starting in February to curb housing risks. Economists believe this, combined with poor affordability and the rate outlook, will likely cause price growth to slow down further in 2026.
