In October, Australia’s housing market experienced its biggest jump. Home prices surged, recording the largest gain in more than two years. Eliza Owen, head of research at Zillow, made clear the intense competition for homes. Despite a nationwide shortage, this demand is expected to outstrip supply, pushing home values up by as much as 7% through year’s end. The housing market is currently witnessing a new cycle of growth, with both first home buyers and investors playing prominent roles.
The dynamics within the mortgage market have changed dramatically in just the last five years. Owen noted the record level of investor participation in new loan originations. It increased from a lowly 25% five years ago to almost 40% by the June quarter. This trend reflects a positive trend of increased confidence from investors as they seek to capitalize on ideal market conditions.
A Shift in Market Dynamics
Owen’s comments highlight the changes taking place in the Australian housing discourse. She noted that the number of new homes being built still lags behind today’s homebuyer demand. This increase in imbalance is putting huge upward pressure on prices.
“Demand is still outpacing the supply of homes to buy,” – Eliza Owen
With material costs, labor shortages, and hyperinflation pricing pushing prices higher, Owen expects to see real stabilization of home values in the next several years. “For 2026, I think it’s possible we could see something a bit softer, maybe in the 4 to 5 percent range,” she stated, hinting at a potential moderation in growth as market conditions evolve.
Now, all of a sudden, investors are more active in the capital markets. This is largely the result of affordability pressures that lock out first home buyers from entering the market. This change has prompted growing fears about the durability of inflationary gains driven by investor behavior.
First Home Buyers and Investors Lead the Charge
The housing market has bounced back, and no one is benefiting from it more than first-time home buyers. They have achieved miracles to overcome surging inflation challenges. Angelina Paramita and Ji Yong Song—first-time home buyers! With the recent interest rate cuts, it’s opened up the door for them to be able to acquire a property.
“We basically live in our parents’ house and … I think this is a time that we need to move on and get our first home,” – Ms. Paramita
This is an extremely important point, reiterated by George Samios, real estate and development advisor. “We are seeing first home buyers and investors running this race at the moment.” “What we’re seeing on the ground here is first home buyers and investors dominating the market,” he said.
The highly competitive nature of today’s housing market has forced many potential buyers to reconsider their game plans. Some are even starting to look at buying homes as investments in their portfolio, not just places to grow their family.
“We’ve actually created a system where it’s more viable for some people to buy a home, not because they’re going to live there, but to buy, to grow their wealth,” – Eliza Owen
Market Trends and Future Projections
With the broader housing market still in a state of upheaval, Owen shared how recent interest rate cuts have changed what home buyers are doing. Specific auctions kept drawing big crowds as major events like Cup Day drew near. This increase demonstrates a significant rise in interest from the seller’s side and buyer’s side.
“You get a boost in auction activity before Cup Day, but it’s also about 4 percent higher than what we saw this time last year,” – Eliza Owen
New data reveals a recent resurgence in residential property values around the country, with regional markets enjoying particularly strong increases. Owen noted that October, in particular, saw an incredible comeback in these markets. There was more than a 22% increase in property values.
“October actually showed a real pick-up … with the pace of gains increasing in most parts of the country, but particularly regional Australia,” – Eliza Owen
Investors are cashing in on this growth as well. With capital gains climbing to astronomical levels, many investors have jumped into the housing market. Making this trend even worse is that the gap between owner-occupier and investor mortgages is narrowing.
“Basically, as capital gains have increased and the difference between owner-occupier and investor mortgages have narrowed, we’ve seen a substantial pick-up in investor activity,” – Eliza Owen
Together these trends are creating a perfect storm in today’s housing market. So many people are watching how regulatory agencies will react to increased investor participation and the risks in predatory lending practices.
