Australia's Residential Property Market: 2025 Overview

Australia’s residential property market closed out 2025 with a mix of resilience, strong price performance, and ongoing affordability pressures. According to Herron Todd White’s (HTW) Month in Review – December 2025, the national market has now logged 11 consecutive quarters of growth, underscoring the depth of demand despite economic uncertainty.

So, what are the key themes that shaped the property market in 2025.

The residential sector continued to show remarkable strength throughout 2025. Even with interest rate fluctuations and broader economic headwinds, buyer demand remained elevated. A major driver of this resilience was extremely tight supply, with total listings sitting 18% below the five‑year average.

At the same time, dwelling approvals hit decade‑low levels, creating a widening gap between housing supply and population growth. This imbalance intensified competition, particularly in lower‑priced segments where affordability is already stretched.

HTW notes that “affordable housing” has effectively lost its meaning for a large cohort of buyers, with many now finding any housing unaffordable. Price growth has been strongest in markets with lower median dwelling values, pushing entry‑level buyers into increasingly competitive conditions.

Population movements have also been shaped by affordability. ABS data shows extraordinary levels of interstate migration from NSW to Queensland and Western Australia, driven largely by relative affordability in those states.

Early in 2025, optimism grew around anticipated cash‑rate cuts. Buyers moved quickly, hoping to secure property before borrowing costs fell further and demand intensified. However, after cuts in February, May, and August, the market saw a paradox: while borrowing costs eased, price growth absorbed much of the benefit, leaving affordability largely unchanged.

Higher‑than‑expected inflation later in the year stalled further rate reductions, contributing to a more cautious buyer sentiment heading into 2026.

The expanded Home Guarantee Scheme in October was expected to stimulate activity at the lower end of the market. While demand has clearly increased, HTW notes that it’s still too early to measure the full impact, with many contracts yet to settle and processing times lengthening significantly.

The overarching theme is clear: demand remains strong, supply remains tight, and affordability remains a critical challenge. Unless construction activity increases meaningfully, the supply gap is likely to widen further.

For buyers, this means continued competition — especially in lower‑priced segments. For sellers, conditions remain favourable in many markets. And for brokers, the environment creates both challenges and opportunities: clients need more guidance than ever.
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​Reference: Herron Todd White Month in Review - December 2025. Download the full report here 

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