The first significantly rough weather in years is hitting Australia’s steerage property market. New data reveals a significant deceleration in large metropolitan areas. The national median dwelling price hit $901,257. In the country’s largest city, Sydney, this has led to the median detached home price climbing to a staggering $1.5 million. The Australian banking regulator, APRA, recently moved to address these issues. Specifically, they’ve instituted tighter home mortgage guidelines to prevent the proliferation of full-doc, low-risk loans. This shift comes as experts warn of ongoing affordability issues that are making it increasingly difficult for young Australians to enter the housing market.
The CoreLogic Home Value Index (HVI) report released today showed another unbelievable shift in property values. In 2025, they jumped 8.6 percent, adding nearly $71,400 to the national median residential property value. Tim Lawless, CoreLogic’s national research director, recently forecast the weakness in Sydney and Melbourne’s property markets will continue. He doesn’t see that changing for the rest of the year. The combined capital cities’ median dwelling price has now reached an eye watering $991,331. This drastic leap demonstrates the affordability crunch that most would-be buyers are forced to contend with today.
Insights from Experts
Nerida Conisbee, the chief economist at Ray White, points out that the majority of Australia remains affordable. She cautions that the bottom line is that the overall terrain continues to be very difficult for first-time buyers. “It is getting really, really hard for young people to get into that market,” she stated. Conisbee pointed to evidence of the five percent deposit scheme driving positive supply growth, particularly in homes at lower price points (<1 million).
As for NDOT’s HR practices, Tim Lawless was on the same page. He pointed out that even for the first time since January of last year, Sydney and Melbourne’s residential real estate markets fell by 0.1 percent in December. “It’s been a little while since we’ve seen a negative movement,” Lawless remarked. He went on to clarify that this downturn is indicative of the persistent affordability challenges still crippling buyers across these metros.
Despite these hurdles, market’s like Perth and South-East Queensland are seeing remarkable growth, highlighted Conisbee. She emphasized, “We still have markets like Perth, which are continuing to see very strong growth.” The broader property market outlook remains very downbeat. Tighter lending conditions and speculation around future interest rate changes are fueling this sentiment.
Economic Factors at Play
Today the Australian Prudential Regulation Authority (APRA), which regulates banks, decided to intervene and impose even tougher lending criteria. Advocates describe this step as necessary to address risks associated with more valuable loans. This regulatory shift would help provide some stabilization to the housing market. It responds to impulse impatience about rising debt loads, especially among borrowers. Lawless noted that this tightening credit environment could dampen demand: “I think we probably will see less demand-side pressures partly just due to affordability constraints.”
Provided interest rates hold, some market observers maintain that a measure of calm has come back to the market. Jordon Le Breux expressed a tempered optimism: “I don’t think it’s going to boom, but I don’t think it’s going to drop. I think it’s just going to be very steady.” Increased talk about future rate increases has helped to sink housing confidence even further, says Lawless.
This lethal mix of low availability for existing inventory coupled with not enough new construction to fill the gap has kept upward pressure on pricing. “We’ve got these opposing forces still ongoing,” Lawless stated. He imagines this tricky ecosystem will govern the market forces at play in the future.
Future Market Expectations
Local experts are looking at a weak property market in 2026. This outlook is heavily influenced by interest rate movements and continuing affordability pressures. Conisbee noted that while growth may slow, it will depend heavily on economic conditions: “The market is expected to be much more subdued in 2026 and it will, of course, depend a lot on what happens to interest rates.”
While the outlook is grim for many first-time and lower-income homebuyers, there remains a bright spot in the current state of the housing market. Conisbee reported that low-cost apartments in Melbourne have helped to insulate first home buyers from rising home prices. “There are a lot of low-cost apartments in Melbourne … they have managed to build a lot of homes at quite a low cost,” she explained.
