As we move past the halfway point of 2025, Australia’s real estate market tells a story of quiet strength, localised shifts and cautious optimism.
National price growth has returned, rental markets remain painfully tight, and the commercial sector faces mixed fortunes, all against a backdrop of steady interest rates and policy changes.
Drawing on the latest figures from CoreLogic and PropTrack, let’s break down what really happened in the first half of the year and what it could mean as we head into the latter part of 2025.
Residential Property Market: Modest Growth Driven by Smaller Capitals
The Australian housing market ended the first half of the year stronger than many expected.
CoreLogic’s Home Value Index shows national dwelling values rose by 1.0% over the last quarter, the fastest quarterly increase since late 2024.
PropTrack’s June Home Price Index tells a similar story, with a 0.4% monthly gain and a solid 4.6% increase over the past 12 months. The median national dwelling price now sits at approx. $905,076.
What’s interesting is where this growth is happening and why.
- Perth and Adelaide continue to lead the pack. Strong population growth, relative affordability, and very tight stock levels mean both cities are on track for annual growth of 5–6%.
- Brisbane remains steady, with demand supported by low listings and lifestyle appeal.
- Sydney is posting moderate growth, but affordability remains a cap: many buyers remain cautious, especially with interest rates still at cycle highs.
- Melbourne has largely flattened out, weighed down by higher listings, policy changes affecting investors, and softer demand.
The consistent theme? Where supply is tight and prices remain relatively affordable, growth continues. But in markets already stretched, buyers are pausing to reassess.
Sales Volumes and Auction Clearance Rates: More Choice, Cautious Buyers
While headline prices rose, the number of homes selling fell slightly.
CoreLogic reports a national drop of around 0.3% in transaction volumes over the latest quarter.
Auction clearance rates reveal a market in transition:
- Sydney and Adelaide have held up well, often recording clearances in the high 60%–low 70% range.
- Melbourne and Brisbane have seen more volatility, sometimes dipping into the low 60s.
Another sign of shifting sentiment: vendor discounting is creeping higher, and average days on market are lengthening slightly. Homes are still selling, but sellers who overprice risk longer campaigns and bigger discounts.
Buyers, meanwhile, are benefiting from more listings and feel less urgency than in the peak pandemic years. Many are watching interest rates closely before making a move.
Rental Market: Record High Rents and a Growing Affordability Divide
Perhaps the biggest pressure point in the market right now is renting.
National median rents have risen sharply since mid-2020, adding about $11,000 a year to tenants’ costs. In some cities, it’s worse:
- Perth renters pay roughly $16,600 more per year than four years ago.
- Brisbane and Sydney tenants pay around $13,000 more.
- Even in Melbourne, traditionally more affordable, annual rents are up by about $8,600.
Vacancy rates remain stubbornly low, generally under 2% across capitals and major regional centres. While new housing completions are slowly coming online, they haven’t yet meaningfully relieved demand.
The result is a rental affordability crisis: wages have not kept pace with rent increases, pushing more households into financial stress. This is forcing difficult choices, from house sharing to moving further away from city centres.
Commercial and Investor Markets: Uneven Demand and Policy Challenges
Outside residential property, commercial real estate and investor sentiment tell a mixed story.
PropTrack data shows about 9% of investment properties in Victoria were sold off by investors, well above the national average of 6%.
New Victorian property taxes have made rental property ownership less attractive, driving some investors to exit or look interstate.
In commercial property:
- Office and retail sectors remain under pressure. Flexible work patterns have kept CBD office demand soft, and consumer caution has weighed on retail.
- Industrial and logistics property continues to outperform, supported by steady e-commerce and supply chain investment.
Across all segments, investors are reassessing where they buy. States with lower taxes and stronger rental yields such as Queensland and Western Australia, are drawing more attention.
Regional and Rural Property Markets: Steady, Selective Strength
Regional Australia remains one of the quieter success stories of the past few years.
While the pandemic-era surge in sea-change and tree-change demand has cooled, CoreLogic data shows regional dwelling values rose by 1.0% in the three months to January, compared with a slight dip in capital cities over the same period.
Standout regional performers include:
- Geraldton (+6.3%)
- Albany (+5.9%)
- Mackay (+5.7%)
- Townsville (+5.1%)
These towns combine affordability with economic activity, lifestyle appeal, and relative insulation from big city price pressures.
Regional median dwelling prices now average around $646,000 — still cheaper than capitals, but the gap is closing in many popular areas.
Interest Rates: Steady Now, Change Likely Ahead
The Reserve Bank of Australia has reduced the cash rate to 3.85% as inflation trends closer to target, although recent cash rate holds have left a bit of uncertainty as to what happens next.
Many economists still forecast rate cuts in the second half of the year which is sure to shift market sentiment – this means:
- Buyers who’ve been waiting may return, increasing competition.
- Borrowing power could rise, supporting prices especially in expensive markets like Sydney and Melbourne.
However, until cuts are confirmed, the market remains somewhat cautious.
What to Expect as We Head Into the Second Half of 2025
For buyers:
- You can expect more choice and slightly softer competition in many areas. If rates fall, borrowing conditions could improve later in the year.
- The market offers more choice than during pandemic peaks.
For sellers:
- Demand remains strong in Perth, Adelaide, and some regional towns. In Sydney and Melbourne, realistic pricing is critical: buyers have become more selective.
For investors:
- Rental demand is still strong, but rental growth may be capped by affordability limits. Investors are shifting to states with more favourable tax settings and better yields.
Final Takeaways: A Balanced Market Shaped by Local Factors
Australia’s property market at mid-2025 is steady, resilient, and highly localised.
The market is no longer moving as one. National price growth is supported by smaller capitals and regional towns, while affordability, policy, and supply differences creating very local outcomes.
Rental demand remains strong but unsustainably high rent levels are testing tenants. Commercial property shows mixed fortunes, and investor strategies are evolving in response to policy and price shifts.
As we head into the second half of the year, watch for:
- The RBA’s next move on interest rates.
- Supply trends, including new completions and listings.
- Local economic drivers, especially migration and job growth.
For anyone looking to buy, sell, or invest, the best advice remains: in a multi-faceted market where no one region is the same, consult a trusted real estate expert in your area.