Australia’s Property Market: Demand, Supply and the Road Ahead

Confidence is quietly returning to Australia’s housing market, and with it, activity. After the fastest rate-hiking cycle in a generation, enquiry is up, listings are getting more eyes, and clearance rates have climbed back above 60% in auction-centric cities. For the first time in four years, all eight capitals recorded quarterly house-price growth. The recovery, though, isn’t uniform and understanding where momentum is building (and why) matters for the year ahead.
Sentiment, spending and the RBA
Three signals are guiding re-entry decisions: inflation, interest rates and consumer confidence. The RBA’s earlier hold at 3.60% was widely expected, but firmer language around Q3 inflation and re-accelerating monthly CPI has softened expectations of an imminent cut, even as the base case still contemplates a move towards ~3.35% if data allows. As household spending lifts with confidence, financing conditions could ease, but the timing may be bumpy, and markets often move ahead of policy shifts.
Signals to watch next quarter:
- Monthly CPI and retail spend prints
- Auction clearance rates as listing volumes rise
- Building approvals and commencements relative to the housing-accord run-rate
Momentum returns - led by the affordable end
The standout feature of this upswing is where the strength sits. Gains are most pronounced at the more affordable 25th percentile, an entrenched yet unusual pattern for Australia. Entry-level stock is absorbing quickly as first-home buyers and investors compete for the same properties, supported by demand-side measures like the expanded Home Guarantee Scheme (5% deposit). Buyer enquiries are rising across the capitals—including previously softer Sydney, Melbourne and Canberra, while views per listing are up and vendor-buyer expectations are reconnecting.
City by city: acceleration vs consolidation
Sydney and Melbourne have moved into the acceleration phase of the price cycle. Sydney’s median house price has tipped above $1.7 million; Melbourne, after a multi-year value reset, is accelerating towards an established recovery, aided by population growth. Victoria is forecast to be the fastest-growing state by FY27. Canberra is also quickening.
Former pace-setters, such as Adelaide, Brisbane and Perth, are moderating as affordability catches up with momentum. Perth remains within striking distance of the million-dollar median mark, but its rate of change is cooling. The broad takeaway: cities most sensitive to rate expectations are back in the driver’s seat, while last cycle’s leaders consolidate gains.
Policy signals and structural shifts
Recent signals imply property remains comparatively attractive to some investors versus superannuation, with flow-on effects for the luxury segment and family trusts. More immediate is the pressure at the entry level: the home-guarantee expansion is bringing forward cohorts of first-home buyers and intensifying competition for precisely the stock preferred by yield-seeking investors. Without a stronger supply response, expect persistent pressure in lower price bands.
Supply, tax and the productivity of existing stock
Here, the constraints are stubborn. Housing is among the most taxed sectors (taxes can account for up to 40% of a new home’s cost), and stamp duty dampens mobility, contributing to under-utilisation (Australia averages 2.3 bedrooms per person). Reform ideas gaining traction include reducing taxes on new builds, transitioning from stamp duty to a broad land tax, and including the family home in the pension test to encourage right-sizing.
New supply is the taller order. Population growth is outpacing dwelling delivery, most states are behind their targets, and approvals are well below the ~240,000 homes a year needed to meet the five-year housing accord. Without faster planning and lower soft costs, demand relief risks turning into price pressure rather than improved affordability.
Infrastructure: uplift is real if hyper-local
Transport infrastructure typically lifts values most within 0–400 metres of stations, with the bulk of the price response occurring between announcement and construction. Units often see sharper, earlier gains that fade faster; houses accumulate value more slowly and tend to hold it better. In practice, micro-location, timing and land-use settings are decisive.
The new shape of demand
Search behaviour tells a story: “granny flat” is now Sydney’s number-one term and rising across all capitals, reflecting affordability pressures, multi-generational living and rental-income strategies. Build-to-Rent is scaling towards an expected 70,000 units by 2030, adding institutional-grade rental supply that should ease pressure at the margin.
Risk pricing is maturing, too. Buyers increasingly factor bushfire and riverine flood exposure into offers, while many ocean-adjacent assets still attract premiums despite limited pricing of coastal-erosion risk. Expect this to evolve as disclosures standardise and insurance dynamics shift.
Regions: normalising after the surge
The pandemic-era regional wave has eased. Demand remains, but not at 2020–22 levels. Sydney’s affordability challenges continue to nudge young families toward more affordable capitals and select regional hubs, yet as Sydney and Melbourne re-accelerate, their gravitational pull on talent, jobs and development pipelines is reasserting itself.
Practical takeaways
- Buyers: Have finance ready, scrutinise flood and fire risk, and weigh near-term infrastructure timelines when assessing micro-locations.
- Sellers: Depth is returning - well-located, right-sized stock priced realistically in the first fortnight is attracting decisive bidding.
- Investors: Focus on yield plus flexibility - granny-flat potential, station-proximate assets and locations that hold value through rate cycles.
- Developers & policymakers: Pair faster approvals and lower soft costs with mobility-friendly tax settings to turn confidence into sustainable affordability.
At Design & Build, we operate where market demand meets delivery capacity. If you’re reshaping product for affordability, scaling project teams or navigating approvals, our specialists can help align people, timelines and market realities, so momentum turns into outcomes.
By Andrew McGregor, D&B Managing Director











