Housing prices continue to climb across the country but the pace of growth is easing slightly, as the Sydney and Melbourne markets lag the mid-sized capital cities.

Cotality’s monthly Home Value Index increased 1 per cent nationally in November, the third month in a row of values rising by 1 per cent or more.

However, it was a slight slowdown from October’s 1.1 per cent rise in values, as some of the heat came out of price growth in the biggest capitals.

Sydney values rose by half a per cent last month, while Melbourne values edged up by 0.3 per cent, compared to rises of at least 1 per cent in all other capitals, the property research firm found.

“The skew towards the mid-sized capitals is especially evident in Perth, where listings are holding more than 40 per cent below average …” said Tim Lawless, research director at Cotality, which was formerly known as CoreLogic.

In comparison, Sydney had a smaller shortfall in supply compared to demand, as listings were tracking just 2.2 per cent below the five-year average, compared to 16 per cent below average listings across the capital cities.

Price growth in mid-sized capitals outpaced larger cities like Sydney and Melbourne, Cotality found. (unsplash)

Mr Lawless said the moderation in the Sydney market could reflect “affordability constraints putting a ceiling on growth”.

Cotality recently found housing affordability had never been worse in Australia on a range of metrics in September, with more than a decade needed to save a standard 20 per cent deposit to buy a house in most capital cities.

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“We can already see the flow-through effect from such stretched affordability and serviceability measures, with growth in housing values skewed towards lower price points of the market,” Mr Lawless said.

Meantime, a report from REA Group’s PropTrack found a median-income household would have been able to afford just 15 per cent of the homes sold nationally in the 2025 financial year.

PropTrack said its housing affordability index had improved over the year, due to higher incomes and lower mortgage rates boosting borrowing capacity, but it said affordability remained near a record low, with low-income households able to afford just 3 per cent of homes sold.

Rate cut hopes kept price rally alive

The Reserve Bank lowered the cash rate three times in 2025, and for much of the year, forecasts were for easing to continue, boosting sentiment in the housing market.

However, recent data indicating inflation may not be as well contained as previously thought have wound back expectations of further rate cuts — and seen some economists change their forecasts to rate hikes.

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Hotter-than-expected inflation figures have caught many off guard and open the door for an RBA interest rate hike in 2026. 

Cotality’s head of research Eliza Owen told The Business the slight easing in home value growth in November was not a huge surprise, given the shifting outlook for rates.

“I think that much of the market momentum was being kept alive by rate cuts in 2025.

“So the fact the outlook has changed … is really changing buyer decision making,”  Ms Owen said.

Auction clearance rates have trended lower since peaking in mid-September, falling below the decade average by mid-November, Cotality found.

Auction clearance rates have trended lower since peaking in September, Cotality says. (AAP: Paul Miller)

Another factor at play in the housing market heading into the new year will be recently announced lending limits.

The banking regulator APRA said it would restrict high debt-to-income (DTI) ratio loans to 20 per cent of a bank’s new lending.

The restriction will be on DTI ratios above six — for example, a household with a household income of $100,000 a year receiving a loan that pushed their total debts above $600,000 would be counted.

MST Marquee senior research analyst Brian Johnson likened it to “banning 8 feet tall people from restaurants”.

Mr Lawless said the APRA measures were likely to have a limited impact on property prices, noting “the majority of recent mortgage originations remain significantly below a DTI of six or more”.

“This new credit policy won’t be implemented until February next year, but even then, it’s likely to only affect the margins of borrowing activity.”Loading…Loading…

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