National home values held relatively steady in December, with price falls in Sydney and Melbourne offsetting gains in the other states.
The pace of home price growth has slowed over the final quarter of 2025, with affordability constraints and a change in interest rate expectations weighing on growth.
Home values were buoyed by three interest rate cuts in 2025. This impact is unlikely to be seen in 2026, with interest rates predicted to remain on hold, or even rise should inflation persist.
Regional home price growth has exceeded the capital city level over each of the past three months, contributing to a higher level of annual growth.
Prices in all of Australia’s capital city and regional markets are sitting higher compared to 12 months ago, with the strongest gains seen in Perth (17.2%), Brisbane (14.6%), and Darwin (14.5%).
In contrast, the markets with the slowest home price growth over the past year are regional Northern Territory (3%), Canberra (4.2%), and Melbourne (4.5%).
Houses have outperformed units over the past 12 months, however the gap in the pace of growth between the two housing types has narrowed over the past year. Compared to 12 months ago, the value of houses has climbed by 9%, while units are up 8.3%.
The national median price of a house is now $977,000, while units are sitting at $717,000. Across Australia's combined capital city markets, this rises to $1,152,000 for houses and $737,000 for units.
Annual home price growth in the regions has continued to outpace the capitals, driven by particularly strong growth in regional Western Australia (13.5%) and regional Queensland (13%).
Annual growth in the regions has now exceeded that of the capitals for each of the past 17 months.
Furthermore, the pace at which home price growth has slowed in recent months has been more pronounced in the capitals compared to the regions.
Queensland and Western Australia dominate when it comes to the best performing regions over the past 12 months, with the top 10 highest growth regions found in these states.
Perth’s North East has seen the strongest growth over the past year, jumping by 19%, followed closely by Darling Downs – Maranoa in Queensland.
The majority of the best performers can be found in more affordable pockets within an hour’s driving distance of their respective city centres.
While home values are expected to rise to new record highs in 2026, the pace of growth is expected to be slower than in 2025.
Interest rates, which had previously been expected to see cuts in late 2025 and early 2026, are now expected to remain on hold due to higher than expected inflation levels.
Should inflation persist, there is even the potential that interest rates could rise, which would place downwards pressure on the pace of home price growth.
Counteracting the impacts of interest rates, however, Australia’s property market continues to be characterised by an imbalance between supply and demand. While the pace of construction activity has picked up, most markets continued to face an undersupply of new homes relative to the level of population growth.
Another major driver of demand in 2026 is the Australian Government’s 5% Deposit Scheme. This policy was launched in October 2025 and enables all first-home buyers, regardless of income level, to purchase a home with as little as a 5% deposit with specified state-based price thresholds.
This policy is expected to drive up demand from first-home buyers, particularly at the more affordable end of the market. As a result, home price growth beneath these thresholds is likely to outpace the market more broadly.
