Property prices are back at record highs. National median house prices have surged past the $1 million mark, according to CoreLogic’s latest data, marking a solid rebound from where the market was headed late last year.
But while media headlines might hint at another boom, the data tells a different story.
In March, national home prices rose 0.4 per cent. It was the second consecutive monthly increase, effectively wiping out the minor declines from late 2024. Sydney remains the most expensive city, with a median house price of $1.64 million. Melbourne trails behind at $937,000, while Brisbane, Adelaide and Perth continue to show strength, though their pace has slowed.
Darwin led price growth for March with a 1 per cent monthly gain, followed closely by Adelaide at 0.8 per cent. These are cities where affordability and rental demand have remained stronger, helping to drive investor activity.
The return to price growth has come on the back of the February rate cut. But it’s not just about lower interest rates. Australia’s tight labour market, moderate wage growth, and chronic housing undersupply are creating strong tailwinds for prices.
On the other hand, several headwinds are keeping a lid on runaway growth. Housing affordability remains stretched. Many buyers are still borrowing at close to their limits. And although population growth has been strong, it’s now moderating, with net overseas migration falling 46 per cent from its peak in early 2023.
As CoreLogic’s Tim Lawless said, this is not the beginning of a new boom. “The rate-cutting cycle is likely to be drawn out,” he said. “Until home loan serviceability improves more substantially, it’s hard to see housing markets moving into a material growth trend.”
Sydney and Melbourne, long considered the leaders of the Australian market, are showing early signs of a turnaround. Both cities recorded gains over the past two months, driven largely by the upper quartile of the market.
Sydney’s prestige suburbs and Melbourne’s blue-chip inner-city areas are typically the first to respond to rate cuts. As we’ve discussed, these markets are more sensitive to changes in borrowing conditions and tend to lead the broader market in both upturns and downturns.
However, Melbourne still lags the other cities over the past five years, with house price growth of just 8.2 per cent compared to Sydney’s 28.2 per cent. Melbourne’s low base and improving affordability could set it up for a period of catch-up growth.
If there is one factor most likely to help growth, it’s the lack of new housing supply. New construction remain below pre-COVID levels, even as population growth continues to outpace completions.
Government targets to build 1.2 million new homes by 2029 are looking increasingly difficult to meet. Construction costs remain high, labour shortages persist, and developers are still struggling to get finance for new projects.
In cities like Perth and Adelaide, where listings are still well below five-year averages, this supply crunch is likely to support prices even as demand slows down. In contrast, Sydney and Melbourne have seen a rise in listings, but the overall stock remains tight by historical standards.
Why this isn’t 2021 all over again
There are clear differences between today’s market and the boom of 2020-21. Back then, record-low interest rates, government incentives, and pandemic-induced FOMO sent prices soaring. Today, buyers are more cautious. Interest rates are still relatively high, and serviceability buffers remain in place.
Even though rates are expected to fall further in 2025, economists suggest the pace of growth will remain modest.
As we’ve consistently said, the best investors don’t wait for the perfect time. They act when others are uncertain. Market sentiment may ebb and flow with interest rates and headlines, but opportunities exist in any market.
Yes, we’re at record highs. But that doesn’t mean we’re at the peak of the cycle.
Even with modest national growth, pockets will emerge. Places like Darwin and Adelaide are benefiting from tight vacancy rates and strong yields. Regional areas like Bendigo and Ballarat are drawing increased investor interest due to affordability and infrastructure spending.
And as we’ve said before, Darwin is already shaping up as a huge growth opportunity in the next few years. Along with Melbourne, which appears to have turned the corner. So while the signs are positive, it’s still important to focus on buying well into markets that will likely outperform.