Australia’s Housing Market Finds Its Footing: A Nation Emerging From the Tightening Cycle
After two years of aggressive monetary tightening, the tide is finally turning for Australia’s economy — and its property market. The latest RPM Residential Market and Economic Review paints a picture of cautious optimism: households are spending again, inflation is moderating, and the once-stalled housing engine is starting to rev back up.
Economic Growth Returns, Driven by Everyday Australians
Australia’s economy expanded 1.3% over FY24/25, the slowest pace in over three decades outside of the pandemic. Yet beneath that headline, momentum is clearly building. The June quarter GDP lifted 0.6%, powered not by big business, but by households and consumers.
Rising real wages, July 2024’s income tax cuts, and three rate cuts in 2025 have boosted disposable incomes and revived spending. In fact, household consumption rose 0.89% in Q2 2025, the sharpest rise in more than two years. Consumers are dipping into savings, with the household savings ratio dropping to 4.2%, well below pre-pandemic averages — a clear sign of renewed confidence.
Interest Rate Relief Rekindles Borrower and Buyer Activity
The Reserve Bank’s decision to cut rates three times in 2025 — from 4.35% to 3.6% — has marked a turning point. These moves have filtered through quickly: standard variable mortgage rates have dropped nearly a full percentage point as lenders compete for businessRPM October 2025 Residential Ma….
The result? Borrowers are breathing again. Housing affordability is improving, and buyer sentiment is lifting across all major capitals. Though inflation rose slightly to 3.24% annually, it remains broadly contained, and the RBA’s current policy setting leaves the door open for further easing if inflation continues to trend down.
Wages Rising, Jobs Steady, and Confidence Creeping Back
In Q2, wages grew 3.37% year-on-year, outpacing inflation and restoring real income growthRPM October 2025 Residential Ma…. This improvement has been pivotal for consumer sentiment. Unemployment has nudged up slightly to 4.5% nationally, but the labour market remains tight — a critical buffer supporting spending power and housing demand.
Even though the Westpac-Melbourne Institute Consumer Sentiment Index remains just shy of neutral (at 92.1 in October), Australians are more confident in their personal finances than they’ve been since 2021. Business confidence is also edging higher, with the NAB Business Conditions Index at +4.3 in August, led by services and property sectors.
Population Growth Remains a Key Tailwind
Australia’s population grew by over 423,000 people in the year to March 2025, driven primarily by overseas migrationRPM October 2025 Residential Ma…. Victoria, New South Wales, and Queensland remain the major beneficiaries, with growth patterns reinforcing long-term housing demand.
Although migration levels have eased slightly from their 2024 peak due to tighter student visa caps, the continued inflow of skilled workers and international students will keep pressure on both rental and new housing supply through 2026.
Property Markets Across the Country: Rebound Underway
Across the capitals, 2025 has seen a return to growth in home values and buyer activity — a marked contrast to the correction of 2022–23.
Melbourne: House prices up 2.7% in Q3 2025, median now $954,500.
Sydney: Stronger quarterly gains in both established and new dwellings as buyers re-enter the market.
Brisbane and Perth: Continue to outperform, with tight supply and interstate migration driving double-digit price growth over 12 months.
Adelaide and Canberra: More moderate gains, but steady upward momentum.
Nationally, dwelling approvals rose 12% year-on-year to August 2025, showing renewed confidence among developers and buyers alikeRPM October 2025 Residential Ma…. Detached house and townhouse approvals are leading the charge as construction costs stabilise and borrowing conditions improve.
Construction and Finance Indicators Point to Renewed Confidence
Owner-occupier loans jumped 18% in Q2 2025, with first-home buyers accounting for 42% of new commitments — the highest share in years. The average FHB loan now sits at $528,000, reflecting increased capacity and growing ambition among younger buyersRPM October 2025 Residential Ma….
Meanwhile, developers are cautiously returning to the market. New dwelling commencements reached 13,828 dwellings in Q2, supported by improving pre-sales and more affordable land costs. Despite near-term supply constraints, the outlook for new housing supply into 2026 is steadily strengthening.
The National Outlook: From Stabilisation to Sustainable Growth
Australia’s economy and property markets are both entering a more balanced, sustainable phase. After a period of intense inflation and rapid rate hikes, the combination of lower borrowing costs, real wage growth, and strong migration is setting the stage for continued moderate expansion.
While RPM notes inflationary risks may delay further rate cuts, the underlying fundamentals — robust population growth, improving affordability, and resilient employment — support a cautiously optimistic view for 2026.
What This Means for Investors and Homeowners
The data suggests one thing loud and clear: Australia has moved past the bottom of the cycle. Markets across the country are stabilising, confidence is returning, and demand is once again outpacing new supply.
For investors, this presents an opportunity to act before momentum builds further. From the steady recovery in Melbourne to strong gains in Brisbane and Perth, the national story is one of consistency — not boom or bust, but gradual, sustainable growth driven by real economic recovery.
In short: Australia’s property market is entering its next chapter — one where affordability, confidence, and steady growth define the landscape. For homeowners and investors alike, 2025’s recovery marks the beginning of a more balanced and opportunity-rich cycle.
