Lower priced suburbs and resource regions drive 2025 gains as constraints loom for 2026
Australia’s housing market has notched a solid rebound in 2025, with national dwelling values on track to end the year at least 8% higher, despite elevated living costs and strained borrowing capacity.
According to Cotality’s annual Best of the Best report, national values have risen 7.7% through the year to date, outpacing the decade average and signalling a faster-than-expected turnaround after a subdued start to 2025. The report highlights suburbs with the strongest capital growth, highest rental yields and most accessible entry points across houses and units.
“Markets entered 2025 under considerable pressure. Affordability had hit a series high, serviceability was stretched and price growth had flattened out,” said Eliza Owen, head of research at Cotality Australia. “What followed was an unexpectedly strong rebound as interest rate cuts, easing inflation and limited supply reignited competition.
“Tight supply meant even modest demand created upward pressure on prices. Cheaper markets had the most acceleration because they remained within reach for buyers navigating higher living costs.”
Three cash rate reductions, an extension of the 5% Home Guarantee Deposit Scheme and listing volumes tracking below average supported three consecutive months of at least 1% price growth by November, lifting the total value of residential property to about $12 trillion.
Owen (pictured right) said the recovery has been most pronounced in lower value markets and regions where buyers were able to respond quickly to improved credit conditions, providing brokers and lenders with more activity at the affordable end of the market.
Prestige Sydney maintains price premium
Sydney’s highest-priced suburbs continued to sit apart from the rest of the country in 2025, widening the gap between prestige postcodes and other metropolitan areas.
Point Piper again topped the national list with a median house value of $17.3 million and unit values above $3.1 million, followed by established eastern suburbs including Bellevue Hill, Vaucluse, Tamarama and Rose Bay.
“Affordability constraints were a defining feature of 2025, yet premium markets continued to operate on their own cycle. These suburbs are far less sensitive to borrowing costs and listing trends, which is why their performance often diverges from the broader market,” Owen said.
Mosman recorded the largest total value of house sales nationally, with $1.58 billion changing hands across 229 transactions, underscoring the depth of demand at the top end even as serviceability tightened elsewhere.
Lower value suburbs lead capital growth
Western Australia dominated house price gains over 2025. Kalbarri’s median house value rose 40.2% to $515,378, with Rangeway (32.2%) and Lockyer (32.0%) also posting strong annual increases.
In the unit sector, growth was concentrated in Queensland’s middle-price brackets. Suburbs such as Cranbrook (up 29.3%) and Wilsonton (up 26.9%) led the way, reflecting buyer focus on more affordable stock.
“Lower value areas offered buyers an opportunity to get into the market if they had the capacity to service a mortgage. Once interest rate cuts started to flow through, demand lifted quickly in those areas where prices had further room to grow,” Owen said.
“Investors were a particularly strong driver of demand in markets across WA and QLD, where the share of new mortgage lending to investors reached 38.3% and 41.1% respectively.”
For mortgage professionals, these trends point to stronger enquiry and activity in regional and outer-suburban pockets where price points remain compatible with tighter serviceability metrics and investor appetite is firm.
Perth, Brisbane and Darwin out in front
Among the capital cities, Darwin recorded the strongest rise in dwelling values, up 17.1% through the year to date after a flat 2024. Brisbane and Perth rounded out the top three performing capitals.
Mandogalup in Perth was the fastest-growing capital-city suburb for houses, with values climbing 33% to $944,609. Several outer Darwin suburbs also featured, with entry-level prices below $600,000 supporting stronger growth as borrowers looked for lower price points.
The most affordable capital-city house markets clustered around Greater Hobart, including Gagebrook, Herdsmans Cove and Bridgewater, all with medians under $450,000. For units, suburbs in Adelaide and Darwin offered some of the lowest median values, from below $250,000 in Hackham, Adelaide to $328,416 in Karama, Darwin.
Regional gains split between mining hubs and weaker pockets
Performance across regional Australia was mixed, with strong upsides in Western Australia and Queensland contrasting with declines in other areas.
House values dropped 11.6% in Millthorpe, New South Wales, and 10.5% in Tennant Creek, Northern Territory. Several regional unit markets also recorded annual falls, including South Hedland (down 14.1%) and Mulwala (down 11.8%).
Owen noted that the variation reflected local differences in supply, migration and economic fundamentals. “Some regional areas are still benefiting from relative affordability and tight rental conditions,” she said. “Others are adjusting to earlier periods of rapid growth or shifts in local economic activity.”
Mining towns deliver highest rental yields
Rental markets in key resource hubs remained tight, with strong employment, limited housing stock and transient workforces contributing to some of the highest yields nationally.
Newman, in the Pilbara, recorded the highest house yields at 12.6%, driven by demand linked to iron ore operations. Kambalda East, near the Goldfields mining belt, followed at 12.2%, supported by nickel and gold activity.
Yields for units were higher still. South Hedland led with a 17.8% yield, while Newman and Pegs Creek returned 14.3% and 13.2% respectively, reflecting constrained apartment supply and steady worker demand. Pegs Creek, in Karratha, also posted a 23.5% rise in house rents over the year, while Rockhampton City saw unit rents increase 21.1%.
These conditions continue to attract investor interest, but also present servicing challenges for borrowers reliant on rental income assumptions and for brokers modelling cash flow in volatile resource-linked markets.
Tighter conditions expected in 2026
Cotality expects the housing upturn to moderate in 2026 as borrowing capacity, affordability constraints and stricter credit assessments weigh on demand.
National listings remain about 18% below the five-year average, while new housing completions are still lagging behind household formation, leaving in place the structural undersupply that helped support 2025 price growth.
Owen said those supply-side factors may not be sufficient to maintain the same rate of appreciation next year. “Supply remains tight, but the demand environment is shifting,” she said.
“Inflation forecasts have been revised higher, interest rate expectations have adjusted with them, and households are facing stricter borrowing assessments. Those factors can temper buyer activity even when stock levels are low. Lower value markets may still outperform because they carry less sensitivity to credit constraints, but overall growth is likely to be more measured compared with 2025.”
For mortgage professionals, this points to a market where activity is likely to remain concentrated in more affordable segments, with careful assessment of servicing capacity and repayment resilience taking on greater importance in new lending decisions.
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