“2025 EOY Property Market and December Update”
Australia’s housing market performance in 2025 was varied, we saw standout performances for Perth, Brisbane and Darwin each notching up amazing growth over the calendar year of 15.9%, 14.5% and 18.9% respectively. Melbourne was again the worst performing capital city with growth of 4.8%, which overall is a solid return considering over the course of 2024 we saw a negative return with homes prices decreasing by 1.8%. Cotality’s Home Value Index records Melbourne’s median home price of $827,117 for units and houses combined, the lowest median of all the major capital cities.
For the month of December, we saw home prices in Metropolitan Melbourne retract by 0.1% ending the cycle of three consecutive monthly increases. Detached houses in Melbourne outperformed units over the year. House values rose 5.8% over the 12 months, with the median house price now just under the million-dollar mark at $981,165. Units recorded a gentler 2.5% annual rise.
For Regional Victoria, we saw the month of December record growth of 0.8% for houses and units combined, finishing the full year with a 6.0% increase in prices. Although, it’s a similar performance to Metro Melbourne in terms of growth when measuring against other major states’ regional growth, where Western Australia topped the charts with 16.1% growth followed by Queensland with 12.6%. New South Wales continues to hold the highest median at $813,223, but Queensland is close behind.
Across Australia, rents rose 5.2% in 2025 for houses and units combined, up slightly from 4.8% in 2024, but well below the near 10% jumps between 2021 and 2023 which were mainly driven by smaller households and a rebound in overseas migration. In the five years to 2020, rents grew just 1.2% per annum, however over the past five years, growth has averaged at 7.4% per annum.
Rents rose across all major regions in 2025, but while rents are still climbing, home values have been rising faster, which is putting downward pressure on gross rental yields. Nationally, the gross yield slipped 11 basis points over 2025 to 3.56%, the lowest since September 2022. Yields in Sydney remains lowest at around 3.0%, while Darwin is highest at 6.19%, despite a 61 bps fall over the year. Melbourne remains an affordable capital city to rent when compared to Perth, Brisbane and Sydney.
The External forces shaping the Melbourne and Victorian market in 2026,
1/ The United States reduced interest rates on 10 December 2025, when the Federal Reserve cut by 0.25%, this marked the third cut to rates in 2025. This will generally have a positive effect on the Australian real estate market with wholesale funding typically dropping.
2/ From February 1, 2026, APRA announced a new cap on high Debt to Income lending. The move is a pre-emptive move to curb risky lending.
3/ From July 1, all Australian taxpayers will receive a tax cut when the tax rate applicable to the $18,201 to $45,000 income bracket drops from 16% to 15%. In July 2027 the rate will then be dropped again, from 15% to 14%.
4/ On the super front, earnings on larger super balances are set to be taxed at a higher rate from July 1. The changes still need to be legislated, but assuming they are, earnings on balances over $3 million will be taxed at 30% (up from 15%), while earnings on balances over $10
Remember, the information provided is of a general nature, always seek independent legal, financial, taxation or other advice in relation to your unique circumstances.
- Free Sales Price Report: https://www.obrienrealestate.com.au/property-report/
- Free Rental Report: https://www.obrienrealestate.com.au/rental-report/
- View our Annual Axis Report: https://www.obrienrealestate.com.au/axis/
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