Rising loan commitments, modest arrears and constrained building capacity underpin a firm but supply‑limited market
Australia’s housing market remained tight through 2025, with dwelling values, rents and new housing finance all rising, even as population growth eased and interest rates edged down, according to NAB’s latest Housing Monitor.
The bank reported that national dwelling prices increased by 8.6% over 2025, taking the median home value to about $900,000. Growth has moderated in recent months, but December still recorded a monthly gain of 0.5%, despite some loss of momentum in Sydney and Melbourne.
Price performance remains uneven across the country. Darwin, Perth and Brisbane recorded the strongest annual house price gains, while Melbourne and Hobart saw the weakest outcomes. Sydney remains the most expensive market, while Darwin is the most affordable capital city on this measure.
Regional markets have continued to hold up, with values outside the capitals modestly outperforming the combined capitals over the year. Across the major cities, properties are changing hands quickly, with homes taking a median of 28 days to sell.
Rental market under pressure
Conditions in the rental market stayed tight in late 2025. NAB’s analysis shows advertised rents rose by 5.9% on a six‑month annualised basis in December, while vacancy rates hovered near historic lows at around 1.6%. This has occurred even as population growth has cooled from earlier peaks.
NAB notes that vacancy rates are low across all states and territories, with Perth, Adelaide and Brisbane also recording the strongest recent population gains. In structural terms, detached houses remain the dominant dwelling type, representing roughly 70% of the national housing stock. The share of detached homes is lower in Sydney and Melbourne, reflecting the larger role of higher‑density housing.
The tenure mix remains relatively stable: about two‑thirds of households own their home, either outright or with a mortgage, while roughly 30% rent.
Investor activity and loan growth
New housing loan commitments have been rising since early 2023, led by investors. By the year to the September quarter, new housing lending was 13% – or $11.5 billion – higher than a year earlier.
NAB reports that mortgage interest rates have fallen by around 80 basis points since early 2024. The average new mortgage for owner‑occupiers now sits at about $640,000. Despite higher loan sizes and strong investor activity, only a small proportion of new lending is written at high debt‑to‑income or high loan‑to‑value ratios, according to the bank.
Arrears have inched higher but remain contained. Housing loan arrears have risen to about 1% of outstanding balances, with the highest rates recorded in low‑documentation lending segments.
Supply still constrained despite approvals lift
On the supply side, additions to the housing stock remain subdued compared with past cycles. NAB notes that net additions are well below their 2015 peak, even as approvals have picked up. The lift in approvals is feeding into an already large pipeline, particularly in the multi‑unit segment.
Apartment starts are now running ahead of completions, keeping the number of dwellings under construction at elevated levels, especially in New South Wales and Victoria. Completion times have shortened somewhat for detached houses and townhouses, but they continue to lengthen for apartments.
NAB’s indicators show that input cost pressures in construction have eased from their highs in mid‑2022. Building output prices and material costs have decelerated, yet remain at relatively high levels. Wages negotiated under enterprise agreements in the construction sector have continued to rise, contributing to ongoing cost pressure.
Capacity constraints and development barriers
The bank’s survey measures point to ongoing capacity constraints in the building industry. Construction firms continue to report significant labour shortages, limiting the sector’s ability to work through the existing pipeline and add new supply.
Developers surveyed by NAB identified rising construction costs and planning or permit delays as the main obstacles to commencing new residential projects. These constraints, combined with high input costs and an elevated backlog of work, are likely to keep the pace of new supply subdued in the near term, despite the recovery in approvals.
State and territory divergence
The national picture masks wide variations in conditions between jurisdictions. In Western Australia, Queensland and South Australia, price growth has been robust, supported by strong population inflows, tight rental markets and limited new supply. By contrast, in New South Wales and Victoria, price growth has moderated, even as apartments under construction remain at high levels due to earlier surges in approvals.
Tasmania and the Australian Capital Territory have experienced more modest price growth and smaller construction pipelines than the larger mainland States. The Northern Territory has seen strong house price gains in Darwin but remains the cheapest capital city market, with weaker underlying demand than in the east coast and Western Australian markets.
Across all jurisdictions, advertised rents and low vacancy rates underscore ongoing rental market pressure, while the construction pipeline – particularly in higher‑density segments – continues to weigh on developers and builders.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
