Australian Property Prices

By Katrina Haskew | 07/07/2025

NAVIGATING THE WORLD’S MOST EXPENSIVE MARKET

Introduction: The Global Stage and Australia’s Property Phenomenon

Australia’s property market has long fascinated both local and international observers. With house prices reaching un- precedented heights, the nation now sits among the world’s most expensive markets, rivalled only by global hotspots such as Hong Kong and New Zealand. According to the 2025 Demographia International Housing Affordability report, “Australia’s median house price is now among the highest in the world, challenging even Hong Kong and New Zealand” (Firstlinks, 2025). This remarkable status is not only a point of pride for some but also a source of deep concern for many Australians, particularly those aspiring to home ownership or seeking to build wealth through property investment.

The story of Australian property prices is not merely about numbers; it is about the social fabric, economic resilience, and the evolving strategies required to navigate an ever-shifting landscape. As prices soar, questions of affordability, market drivers, and the resilience of both individuals and the broader economy come to the fore. This article explores the current state of the Australian property market, the forces behind its ascent, the challenges it presents, and the strategies available to those seeking to thrive in one of the world’s most expensive markets.

The Numbers: How Expensive Is ‘Expensive’?

To understand the scale of Australia’s property phenomenon, one must first examine the numbers. As of June 2025, the median house price in Sydney has surpassed $1.6 million, with Melbourne and Brisbane not far behind (Your Mortgage, 2025). “Sydney’s median house price has surpassed $1.6 million, with Melbourne and Brisbane not far behind,” reports Your Mortgage. These figures are not isolated to the major capitals; regional markets have also seen significant growth, fuelled by lifestyle changes and the widespread adoption of remote work.

The latest data from Property Update (May 2025) shows that national median house prices have continued to climb, despite periodic slowdowns. “The Australian housing mar- ket has demonstrated remarkable resilience, with prices rising by an average of 8.2% over the past year,” notes Property Update. This resilience is echoed in the Demographia report, which places several Australian cities in the top ranks of global unaffordability.

A global comparison reveals the extent of Australia’s housing boom. According to the Demographia International Housing Affordability report, “Australian house prices are now only marginally below those of Hong Kong, the world’s most expensive market” (Morningstar, 2025). This places immense pressure on first home buyers, who face daunting entry barriers, and on investors, who must carefully weigh the risks and rewards in a market that has already experienced significant appreciation.

The implications are profound. For first home buyers, the dream of ownership increasingly requires creative strategies, such as pooling family resources or considering ‘rentvesting’—purchasing investment properties while renting in preferred locations. For investors, the challenge lies in identifying value and managing risk in a market where traditional metrics may no longer apply.

What’s Driving the Market? Forces Behind the Price Surge

The extraordinary rise in Australian property prices is the result of a complex interplay of factors. Chief among these is a chronic undersupply of new homes, which has failed to keep pace with population growth and changing household dynamics. As Property Update succinctly puts it, “The chronic undersupply of new homes remains the single biggest factor underpinning price growth” (Property Update, 2025).
Population growth, particularly in major cities, continues to drive demand. Australia’s migration program, which rebounded strongly after the pandemic, has added hundreds of thousands of new residents each year, intensifying competition for housing. This demographic pressure is especially acute in Sydney, Melbourne, and Brisbane, where infrastructure and planning have struggled to keep up.

Interest rates, too, have played a pivotal role. The Reserve Bank of Australia’s (RBA) recent rate cuts have made borrowing more accessible, fuelling demand and supporting higher prices. As noted in the Property Update’s latest market statistics, “The impact of RBA rate cuts has been immediate, with buyer sentiment and auction clearance rates both surging in the months following each announcement” (Property Update, 2025).

Government policy has also shaped the market.

Incentives for first home buyers, such as the First Home Owner Grant and various stamp duty concessions, have pro- vided some relief but have also contributed to demand-side pressures. Meanwhile, investor activity remains robust, with many Australians viewing property as a cornerstone of long- term wealth creation.

Regional differences are increasingly pronounced.

According to API Magazine, “While Sydney and Melbourne continue to dominate headlines, regional markets such as the Gold Coast, Newcastle, and Geelong have posted double-digit price growth, driven by lifestyle migration and improved connectivity” (API Magazine, 2025). This diversification underscores the resilience of the Australian property market, as buyers and investors adapt to new opportunities outside the traditional capitals.

Affordability and Resilience:

Challenges and Strategies for Australians

Despite the market’s strength, the issue of affordability remains front and centre. For many Australians, the dream of home ownership is slipping further out of reach. “Affordability has improved slightly, but remains a significant barrier for many Australians,” observes Australian Property Update (2025). The slight improvement is attributed to recent wage growth and modest price corrections in some markets, but these gains are often offset by rising living costs and stricter lending standards.

The social and economic impacts of unaffordable housing are far-reaching. Younger Australians are delaying major life milestones, such as starting families or investing in their own homes. This, in turn, affects broader economic growth and social cohesion.

To navigate these challenges, Australians are adopting a range of strategies. ‘Rentvesting’—where individuals buy investment properties in more affordable areas while renting in their preferred locations—has gained popularity.

Government schemes, such as shared equity programs and targeted grants, provide additional pathways to ownership, though their effectiveness remains a topic of debate.

Financial planning is more critical than ever. As Firstlinks notes, “In a market characterised by volatility and high entry costs, sound financial advice and disciplined budgeting are essential for both buyers and investors” (Firstlinks, 2025). This is where the role of the financial adviser be- comes paramount, helping clients assess risk, diversify their portfolios, and plan for the long term.

From a philosophical perspective, resilience is not just about weathering market fluctuations; it is about adapting to change and making informed decisions in the face of uncertainty. As the Australian market continues to evolve, those who remain flexible and open to new strategies are best positioned to succeed.

Looking Ahead: Navigating the Path Forward

What does the future hold for Australian property prices? While no one can predict with certainty, most experts agree that the structural factors underpinning the market—popu- lation growth, supply constraints, and the enduring appeal of property as an asset class—will continue to support prices over the medium to long term.

API Magazine forecasts that “while price growth may moderate, structural factors suggest ongoing resilience in the Australian market” (API Magazine, 2025). This view is echoed by Property Update, which notes that “the funda- mentals remain strong, but buyers should be prepared for periods of volatility as economic conditions shift” (Property Update, 2025).

For retail clients of financial advisers, the key lies in balancing opportunity with caution. Diversification—across asset classes, regions, and property types—remains a prudent strategy. Risk management, including appropriate insurance and contingency planning, is essential in a market that can turn quickly.

Wealth preservation is also critical. As the market matures, capital growth may slow, making rental yields and cash flow more important considerations for investors. Advisers can help clients assess the true costs and benefits of property investment, ensuring that decisions align with broader financial goals.

In conclusion, navigating Australia’s property market requires a blend of resilience, adaptability, and informed decision-making. By understanding the forces at play and seeking expert guidance, Australians can continue to build and preserve wealth in one of the world’s most dynamic— and expensive—property markets.