Quarterly price growth accelerates as competition intensifies at lower price points
Demand-driven price increases across Australia’s capitals are sharpening affordability pressures for borrowers, with new entrants and low-deposit households among the most exposed, a report from the Real Estate Institute of Australia (REIA) has revealed.
REIA’s Real Estate Market Facts (REMF) report for the December 2025 quarter showed that the expansion of the government’s 5% deposit scheme has been a key factor in current conditions, lifting borrowing capacity and intensifying competition in more affordable segments, particularly for other dwellings.
Source: Real Estate Institute of Australia
House prices recorded broad-based gains. The national median rose 4% over the quarter to $1.17 million, the strongest quarterly increase since December 2021. Every capital city posted growth, led by Perth, Brisbane and Adelaide.
REIA said demand-side momentum is intersecting with wider economic constraints, including consecutive interest rate rises, debate over housing tax settings and ongoing cost-of-living pressures.
“While the scheme has supported access to home ownership, it has also lifted borrowing capacity and increased competition at more affordable price points, contributing to stronger price growth, especially in the other dwellings market,” said Jacob Caine (pictured right), president of the Real Estate Institute of Australia.
Caine noted that the impact is being felt most sharply by newer participants in the market, particularly those using low-deposit lending.
“This cohort are more likely to purchase other dwellings in middle and outer suburban areas, where longer commuting distances mean higher exposure to rising fuel and transport costs, further stretching already tight household budgets,” he explained.
In rentals, the report pointed to modest changes in advertised medians. National median rents for three-bedroom houses increased 1.3% over the quarter, while two-bedroom other dwellings rose 0.9%. REIA said vacancy rates remained low, with tight conditions continuing across most capitals.
The real estate body also noted heightened policy uncertainty following this week’s Select Committee on the Operation of the Capital Gains Tax Discount report. The Greens-led committee proposed major changes to the capital gains tax discount and negative gearing, which REIA said did not sufficiently account for implications for housing supply. It added that Labor members did not formally endorse the recommendations, but signalled the findings may inform budget deliberations ahead of May.
“In a market already facing chronic undersupply, any policy changes must be considered in the context of their impact on private investment and the delivery of new housing,” Caine said.
“The result of reducing the CGT discount or negative gearing will be a reduction in rental property investment. This will lead to a contraction in the supply of rental properties putting upward pressure on rents, as fewer investors enter or remain in the market.”
REIA said the Reserve Bank of Australia’s latest rate increase is expected to further erode the affordability gains seen last year, particularly for households carrying higher levels of mortgage debt.
“All four major banks are now expecting further rate increases through to at least May, particularly if underlying inflation remains elevated,” Caine added, noting that the RBA has warned inflation may remain above its 2.5% midpoint target until at least 2028, indicating a longer period of tighter financial conditions.
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