Housing prices are still climbing – but the heat is coming off
Australia’s housing market is still ticking higher, just not quite as fast as it was a few months ago. According to Cotality’s latest Home Value Index, national home values rose 1.0% in November 2025, the third month in a row of 1%-plus growth. That’s solid – but slightly softer than October’s 1.1% rise reported by Cotality; So we’re not in “boom” territory, but the market is still moving up in most places.
Mid-sized capitals are doing the heavy lifting
Not all cities are sharing the gains equally.
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Perth is the standout, up 2.4% in November alone, adding just over $21,000 to the median dwelling value in a single month – around $5,000 a week.
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Sydney rose 0.5%.
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Melbourne crept up 0.3%.
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Every other capital city saw at least 1.0% growth in November.
Cotality notes that mid-sized capitals are again pulling away from the big two (Sydney and Melbourne), a pattern we’ve seen before in 2023 and 2024. Perth in particular is being driven by very tight supply – listings are sitting more than 40% below average, while buyer demand remains strong. For Sydney, the softer 0.5% gain likely reflects stretched affordability and a smaller supply shortage. Listings there are only about 2.2% below the five-year average, compared with around 16% below average across the combined capitals. Sydney’s monthly growth also seems to have peaked back in August at 0.9%.
Auction signs: still busy, but not buzzing
Another clue that momentum is easing: auction clearance rates. After peaking in mid-September, clearance rates have cooled and by mid-November had slipped below their 10-year average. In both Sydney and Melbourne, clearance rates have been sitting in the low-60% range through the second half of November. That doesn’t mean the market is “dead” – but it does suggest buyers are a bit more cautious, and sellers can’t push prices quite as aggressively as they could earlier in the year.
Affordability: the big speed bump
If the market is slowing a little, one big reason is simple: housing affordability is the worst it’s ever been. Cotality’s affordability metrics for the September quarter show;
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The national dwelling value is now 8.2 times the annual pre-tax household income.
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A typical borrower would need about 45% of their income just to service a mortgage on a median-priced home.
Those are either record or near-record levels. For many households, that’s a red flag:
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It’s harder to save a deposit.
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Borrowing capacity is stretched.
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Even if you can get approved, the repayments can be confronting.
As a result, it makes sense that fewer people can comfortably enter the market or upgrade right now. The growth we’re seeing is increasingly coming from segments of the market where prices are lower and serviceability still just stacks up.
Where the growth is happening within each city
Interestingly, the strength isn’t evenly spread within cities either:
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In most capitals, the lower-priced quartile of the market has been growing the fastest over the past three months.
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Melbourne is the main exception – there, the “middle” of the market is currently leading the gains, reflecting slightly less stretched affordability compared with Sydney and some other capitals.
This tells us buyers are still active – they’re just being pushed towards more affordable price points.
Rates, inflation and the mood of the market
The other big headwind is interest rates – or more accurately, the expectation that they’ll stay higher for longer. Inflation has recently bounced back above the Reserve Bank’s target range, and the general view now is that rate cuts are likely further away than many had hoped.
For housing, that means:
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Borrowers remain under pressure from higher repayments.
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Banks keep applying tough serviceability buffers.
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Sentiment takes a hit – especially for first-home buyers and upgraders who are already at the edge of their borrowing capacity.
Cotality’s research director notes that with affordability so stretched, these higher-for-longer rates are likely to keep a lid on how far and how fast prices can rise from here.
New lending rules: APRA tweaks, but no game-changer
On top of affordability and rates, there’s also a policy shift coming. From February next year, APRA will limit the share of new lending going to high debt-to-income (DTI) borrowers – those with DTIs of six times income or more – to 20% of new loans.
In practice, though, most new mortgages are already written below that level. So for now, this change is expected to:
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Affect only the margins of borrowing activity.
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Mostly impact the highest-stretched borrowers, rather than everyday buyers with more conservative debt levels.
For many households, it won’t change the borrowing conversation dramatically – the bigger issue remains how much income you have and how comfortable you feel with repayments at current interest rates.
What this all means if you’re thinking about a move
If you’re:
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Buying your first home – the market is still rising, but not as aggressively as earlier in the year. Tight affordability and lending rules make it more important than ever to understand your borrowing capacity, your true repayment comfort zone, and which markets/suburbs still offer value.
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Upgrading or downsizing – conditions vary a lot by city and price point. Lower-priced segments are moving faster in many areas, while premium markets are a bit more subdued.
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Investing – tight rental markets and ongoing price growth in some mid-sized capitals are still attracting investors, but higher rates and serviceability tests can limit how much you can borrow.
At Orchard Lending, we spend a lot of time unpacking exactly these trends for our clients – not to scare anyone off, but to make sure your decisions line up with both the market reality and your personal budget.
Final thoughts
To sum it up:
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Prices are still going up nationally, just a little more slowly.
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Perth and other mid-sized capitals are leading, while Sydney and Melbourne are feeling the effects of stretched affordability.
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Clearance rates, affordability and rates all suggest the market is moving into a more balanced – but still competitive – phase.
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Policy tweaks like APRA’s new DTI cap will nibble at the edges but aren’t likely to rewrite the housing story on their own.
If you’d like to understand what these shifts mean for your borrowing power – whether you’re looking to buy, refinance or invest – a quick chat can go a long way. You bring your goals. We’ll bring the numbers and translate them into plain English.
