Market Report
Summer Market Report: Property Insights
4 December 2025
by Sally O'Connell, Chief Executive Officer
AUSTRALIA’S ECONOMY & HOUSING: STEADYING WITH ROBUST HOME PRICE GROWTH
by Sally O’Connell, Chief Executive Officer
Australia’s macro environment has shifted meaningfully during the past year. There has been a material and positive shift toward positivity generally in the economy. From the beginning of 2025, and a peak of geopolitical uncertainty, exacerbated by the election of the Trump administration and locally the upcoming Federal election, Australians were wary of what the changes may bring. Both events have had minimal downside impact to date.
As the year has progressed, we have seen a continued path to a soft landing, steadily accelerating asset price growth, while employment has remained robust and we entered and worked through a cycle of interest rate reductions. The property market nationally has responded with gusto, and is now tracking at annualised gains of 11.2%
Notably the Westpac Melbourne Institute consumer sentiment has moved positively, rising a strong 12.8% to 103.8 in November from 92.1 in October. We started 2025 well below the 100 benchmark: impacted by cost of living and fear of tariff impact issues. Whilst cost of living remains an issue, the tariff fears are yet to materialise, and sentiment has improved. The November surge through the ‘net positive’ 100 and the associated wealth effect from increased property prices, are important gauges for the economy and housing market.
The recent September quarter economic data indicate the Australian economy is cycling upward and some of the most recent data is stronger than most would have expected. Government employment has remained at record levels, housing loan defaults are at or near all-time lows, and business investment has also just recorded its highest growth in four years in the September quarter, impacted heavily by the boom in investment in data centres, a new growth engine for the economy. This week’s inflation read is heavily influenced by a lift in consumer discretionary spending off the back of interest rate cuts and wealth effect from accelerating house prices.
The latest inflation spike is likely to temper some of the recent momentum in home prices, as markets factor in the possibility of rate pressure returning in 2026. Across the nation, buyer activity strengthened through Spring, though early Summer has brought a subtle but noticeable shift toward more cautious decision-making.
National Price Growth: re acceleration with wide variability
Over the three months to October, national dwelling values rose 3.1%, Perth surging ahead with 7.4%, Darwin second at 5.7% and Melbourne lowest at 1.6%. Annual national growth sits at 7.5%, with all capitals posting positive year-on-year results, again Melbourne at 4.2% last. Whilst annual growth rates are usually the headline, they are historical, and the start of the data is twelve months old. Of greater relevance is the most recent quarter, then annualised. Whilst a smaller data set, it is a read on the most recent activity and often a more relevant measure of activity right now.
On a quarterly annualised basis, residential property values continue to gain momentum as we move into Summer. Annualised national quarterly growth now sits at 12.4%, ahead of the backward looking 7.5% annual rate. The trend is clearly one of accelerating price growth rate. Although very strong, this will likely soften slightly should it become clearer we have reached the end of rate cutting cycle and rates are stagnant or even potentially poised for an upward movement.
Rolling quarterly capital city annualised price growth from Cotality Australia are as follows:
- Perth an astonishing 29.6% (AT PEAK)
- Darwin 22.8% (AT PEAK)
- Brisbane 22.0% (AT PEAK)
- Adelaide 17.6% (AT PEAK)
- Hobart 9.6% (6.9% below March 2022 peak)
- Canberra 8.8% (2.5% off May 2022 peak)
- Sydney 7.2% (AT PEAK)
- Melbourne 6.4% (1.4% off March 2022 peak)
Source: Cotality
Perth heads the list at 29.6%, along with Darwin at 22.8% a resurgent Brisbane next increasing strongly to 22.0%. Adelaide remains strong at 17.6% and Sydney now stabilising at 7.2%. Hobart has bounced back with 9.6% and Melbourne remains a laggard, with an annualised increase of 6.4%, however this is a material increase on last quarter of 4.8%. We continue to see a directional improvement in the Melbourne market albeit far slower than the leading Australian capital cities.
These are extraordinarily strong rates of growth when annualised from the past quarter. They represent a quarter in which supply was constrained, demand continued to accelerate in an environment of low and expected reducing interest rates. All enclosed in an economy with resilient and low unemployment. Given the most recent uptick in inflation, slight emerging clouds over employment, and subsequent reduction in rate cut expectations, we would expect a slight tapering of these annualised price increases in the medium term. Melbourne, however being at the tail end of these increases, should be positioned for continued growth off a very low base in coming quarters.
At the First Home Buyer level, the Federal Government’s 5% deposit scheme has boosted demand, which in turn has pushed prices higher. As flagged in our Spring Report, this heightened activity is now flowing into the next one to two price brackets above typical FHB ranges, lifting competition there as well. While the scheme enables buyers to enter the market with a smaller deposit, it ultimately drives prices up and does little to improve overall affordability.
Melbourne Snapshot: resilience with value on offer
Although trailing the majority of Australian capital cities, Melbourne price growth has continued to gain some momentum, with the last quarter annualised at 6.4%. Well below the boom cities of Perth and Darwin, we’ve entered a phase of moderate growth yet still maintaining the mantle as one of the most affordable housing markets in the country. Given the lifestyle, amenity, international standing and current plus forecast population growth, metropolitan Melbourne presents as a value outlier that will begin to move toward equilibrium in the near term. The market is poised for a re-rating notwithstanding the political and associated property taxation barriers. The downward adjustment has been overdone.
Encouragingly, the uncertainty of the past cycle is receding. Listings have lifted from their lows, buyer sentiment has improved in response to policy clarity and modest rate relief, and price momentum is re-establishing itself. Importantly, this is a measured recovery, grounded in real demand and defined by a clear “flight to quality” rather than speculation.
Nowhere is this more evident than in the premium pockets of Stonnington and Boroondara. These suburbs continue to attract purchasers who prioritise schools, amenity and liveability above all else. Well-located, renovated homes remain highly contested, with committed owner-occupiers driving decisive outcomes at both auction and off-market. Average or compromised stock is still selling, but buyers are selective, a hallmark of a discerning, rather than overheated, market.
Lifestyle regions such as the Macedon Ranges and the Mornington Peninsula continue to attract buyers seeking space, amenity, and the tranquility of coastal or tree-lined retreats. While demand remains strong for homes with character, land, or distinctive lifestyle attributes, the market is seeing more owners selling second properties due to higher holding costs, including land tax and vacant property levies. This has created a more measured dynamic: opportunities exist, but competition is disciplined and discerning. Scarcity still supports values for well-located, desirable properties, yet cost-of-ownership considerations are shaping buyer behaviour, keeping activity balanced and considered.
For buyers, this is an environment that rewards preparation and clarity of purpose. For vendors, success hinges on presentation, realistic pricing and engaging the right audience, all the fundamentals that define every effective campaign.
The takeaway: Melbourne is firmly in its “value rotation” phase. Exceptional homes in blue-chip locations continue to exceed expectations; secondary stock requires thoughtful pricing to meet the market; and downsizer-friendly formats, especially well-designed single level homes remain tightly held. With Victoria welcoming close to 98,000 new residents over the past year and forecast to add 100,000 to 130,000 annually, the demand foundation beneath this market is as compelling as it has been in a decade.
Listings & Market Depth: A leaner landscape
The so called ‘spring selling season’ has failed to materialise with the gusto some thought would occur nationally. After a lackluster start, listing numbers across the nation grew in October however were 3% below October last year, and more in line with the five-year average. Conversely, Melbourne listings are up 9.2% on the prior October, bucking the national trend. With sales numbers 8.8% up, what is coming to market is selling. Interestingly, total listings on the market in Melbourne are 12.5% down on the same time last year, and this is reflected in days on market also bucking the national trend, sitting at just 30 days, a 15% reduction in the time it takes to sell a property compared to the same time last year. As a result, we are moving toward Christmas with less total supply on the market. These factors augur well for a balanced to solid market in the new year, a market that will be receptive to new listings at the beginning of 2026.
National Auction clearance rates were 68% for November and 67% for October, slightly softer than 70% in September, however still indicating a seller’s market.
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Rental Markets: record low yields as price growth outstrips rental growth
Nationally, rents have climbed again, increasing 4.6% over the past year. Interestingly, capital cities were up 4.0% whilst the higher growth has been regional markets at 6.1%. Capital cities continue to vary with Darwin leading at 8.5% and Melbourne again delivering the lowest increase of just 1.8% although significantly up on 1.1% last quarter.
National rental growth has been subdued through 2025, following an exceptionally strong prior year. Momentum is now rebuilding, though Melbourne’s slower rental growth continues to weigh on investor confidence. Coupled with Victoria’s higher taxation burden, investment activity has remained restrained despite gradually improving interest. The upside is clearer for renters: ongoing population inflows and stabilising rental conditions provide some welcome relief compared with the sharp escalations of recent years.
National gross rental yields for October were 3.61%, being the lowest level in two years. Home values have increased by 1.1% in the past month, compared to rental growth at 0.5% – meaning yields are expected to continue compressing for at least the short term. Rental yields in Melbourne are in line with the national yield of 3.6%
Rates & Inflation: the year ends with an unexpected uptick
Following three rate cuts that lifted sentiment and supported stronger home prices, the RBA has kept rates steady at its last two meetings. The latest inflation print of 3.8% came in higher than expected, and underlying inflation remains clearly above the RBA’s 2–3% target band, reinforcing the Bank’s cautious stance.
The reemergence of inflation, and pointedly services inflation is now beginning to approximate a trend, and the resulting view amongst banks and economists is the rate cutting cycle is over for now. It’s likely rates will be on hold for some considerable time, and there’s a growing possibility the next move during 2026 may in fact be up.
This will have a slightly negative impact on sentiment and is likely as earlier mentioned to take some momentum out of the rate of price growth. It must be said that an annualised growth rate of 11.2% feels excessive, and the expected reduction in that rate, to single figures, would be a healthy and more sustainable outcome.
Growth & Jobs: insipid GDP, robust employment, however, with downside risk
Our GDP growth has been uninspiring to date and is forecast to be just 1.7% for the year to December. The picture is similar for the immediate term with just 2% forecast for both 2026 and 2027. China’s property slowdown continues to be a concern for our resources sector, a prime driver of much growth over the prior decade. This is one of the major factors influencing the insipid GDP growth forecasts.
Australia’s labour market continues to soften gradually from the extreme tightness of the past two years. The unemployment rate is currently 4.3%, up from 3.8% mid-year, as hiring momentum cools and migration lifts the supply of workers. Over recent months, job vacancies have eased from record highs and hours worked have flattened, a shift the AFR has repeatedly highlighted as evidence that employers are “trimming hours, not staff,” signaling a normalisation rather than a deterioration.
The recent and sustained surge in population through migration is adding labour supply more quickly than labour demand, easing wage pressures and one of the factors that has to date kept a lid on inflation. RBA forecasts from November have unemployment stabilising around 4.25% through 2026. There remains downside risk as the current government employment rates are unsustainable and accelerating job cuts due to the proliferation of AI present challenges to a number of services sectors.
Victoria broadly mirrors this national trend, though from a stronger base. The state’s unemployment rate sits near 4.0% and has edged only modestly higher in recent months. Victoria remains comparatively resilient due to its robust population growth, which continues to support demand across education, healthcare, infrastructure and professional services; a key reason Victoria’s unemployment rate is still tracking slightly below the national average and is expected to remain so over the next 12–18 months. For the housing market, this backdrop reinforces a key message: the labour market is cooling, not weakening, and remains fundamentally supportive of incomes, confidence, and ongoing demand for quality homes in supply-constrained Melbourne suburbs.
Population and Supply – inflows to exceed any supply growth
Australia’s population trajectory remains the strongest underpin for residential property. Net overseas migration is gradually reducing from the post-COVID surge but remains well above long-run averages, and the combination of elevated student flows, returning expats and pent-up skilled-migration demand is continuing to place sustained upward pressure on housing requirements.
National population growth is running at roughly 1.8–2.0%, the fastest in the developed world, adding the equivalent of a new Canberra every 12–15 months. Within this national momentum, Victoria stands out with projections that the state’s population is expected to increase by around 125,000 per year over the coming decade, translating to an annual growth rate of approximately 1.7%, with the population reaching circa 7.5 million by 2029, then gradually moderating to around 1.2% by 2051 as the population reaches about 10.3 million. Melbourne remains the epicentre of this expansion. The metropolitan area is projected to capture about 80% of this future growth, reinforcing the city’s position as Australia’s fastest-growing capital in terms of population momentum.
Over time, this resurgence among young families and skilled professionals is and will be amplifying underlying demand for quality inner- and middle-ring homes, tightening rental markets, and reinforcing the long-term value proposition of premium Melbourne real estate.
As population keeps increasing and the supply of new homes lags, upward price pressure will continue. Victoria, and specifically metropolitan Melbourne is the prime beneficiary of strong future population flows.
Risks to watch
The most recent emergence of ‘hotter’ than expected services inflation presents an interest rate and cost of living risk, and consequential impact on consumer sentiment. Geopolitical risks remain unquantifiable and whilst uncertainty remains there has been a cooling in recent months, shifting this risk from immediate to mid-term.
Asset price bubble risks persist, however the small cooling in equity markets in recent months has mitigated this slightly. There appears to be significant exuberance in the AI and related data centre investment, attracting material capital investments, the returns on which are yet to be proven. The ongoing weakness of the Chinese property sector is one of the most significant downside risks to Australia’s outlook. This is likely to translate into softer demand for commodities such as iron ore and coal, weaker export earnings, taxation revenue and a drag on GDP growth and employment growth. Finally, the proliferation of AI adoption especially in service sectors presents an unemployment risk.
Whilst risks abound, the consumer remains in relatively robust shape, and the likelihood is steady progress through a soft landing.
What does this mean for Abercromby’s clients?
Sellers
This is a market that rewards quality, preparation, and clarity of value. While some properties are attracting competitive bidding, others are achieving strong results through discerning buyers recognising superior location, architectural integrity, outstanding presentation, and being willing to pay a premium for the privilege of a turnkey home. Premium homes are highly sort often within compressed days-on-market, reflecting both buyer confidence and a soft-landing macro backdrop that is steadily supporting purchasing capacity. For sellers planning a 2026 campaign, early preparation remains a key differentiator. Light-touch pre-sale works, thoughtful styling, and well-executed print and digital strategies continue to expand bidder pools and elevate outcomes. Pricing should balance the increasingly firm tone of the market with recent comparable sales, and the most successful campaigns are those that combine confidence with careful calibration.
Buyers
This period offers a strategic window for well-prepared purchasers. With interest rates paused and population growth accelerating, buyer competition is expected to intensify into the second half of 2026. Securing quality stock now, particularly in blue-chip school zones or lifestyle suburbs with scarcity value positions buyers ahead of that curve.
The fundamentals matter more than ever: orientation, walkability, amenity, build quality and long-term desirability. Melbourne’s value gap relative to other capitals will not persist indefinitely, and today’s prices in Stonnington, Boroondara, and select lifestyle markets will likely look favourable in hindsight. For those stretching, disciplined structure, clarity on renovation appetite and flexibility on settlement terms remain key.
Investors
Victoria presents a more nuanced landscape for investors. Higher holding costs have tempered activity, yet rental markets are stabilising, and immigration-driven tenant demand remains exceptionally strong. Yields are expected to edge higher as rental growth rebuilds through 2026 and stock remains tight. Selectivity is crucial. Properties with enduring tenant appeal, light, quiet homes with storage, parking and access to rail, universities or major employment hubs are outperforming on both occupancy and rent resilience. Sub-$1.5m assets, in particular, are emerging as the segment most likely to experience renewed investor-led price momentum as confidence rebuilds.
For clients across the board, Melbourne’s market is transitioning out of its adjustment phase and moving steadily back toward equilibrium. Price growth is likely to moderate from the recent annualised peak but remain positive, underpinned by strong migration, constrained supply and a stabilising macro environment.
Abercromby’s clients are well placed to navigate and capitalise on the next phase.
Outlook
The emergence of services inflation is starting to indicate a trend and does present a slight red flag with emerging concerns that the next move in interest rates may be up. Most likely scenario is we are in for a period with no move in interest rates. This is likely to temper sentiment and moderate asset price growth, with the current annualised rate of 11.2% expected to ease in the months ahead.
Australia’s GDP is likely to be benign for the foreseeable future, with little more than 2% expected for 2026 and 2027. Interest rates are now likely to be stable for several months with a slight emerging bias to upward pressure should inflation persist. Unemployment remains robust and is forecast to hover around 4.25% over 2026. This points to stability in the housing market, with an underpin of price growth due to demand outstripping supply. For Melbourne and Victoria, expect growth rates to increase slightly from a depressed base.
Increasingly quality homes in desirable areas will stand out as exceptional value when compared to most other parts of Australia. In other words, a soft landing for the Victoria property market after a period in the wilderness. From an investment perspective, challenges remain in the immediate term, courtesy of property taxes, however the nation of investors are beginning to train their eyes on this market, and we will likely see pockets of price acceleration in the investment markets, especially sub $1.5m. This positive momentum will filter through to first, second and middle to upper-class markets of quality homes.
Expect moderate yet improving sentiment for the Victorian property market through 2026.