Australia’s property market is showing early signs of cooling, particularly in Sydney and Melbourne, as affordability pressures rise and homeowners make record levels of additional mortgage repayments. New data from Cotality reveals a subtle shift in momentum following months of rapid growth across the nation’s housing markets.
Capital City Housing Values Ease in November
According to Cotality, dwelling values across Australia’s capital cities rose by 1% in November, easing slightly from October’s 1.1% increase.
In Sydney, the median house value inched up 0.4% to $1.584 million, down from October’s 0.6% rise. Meanwhile, Melbourne’s median house value grew 0.3% to $978,392, a noticeable slowdown from the 0.9% recorded the previous month.
These softer increases suggest that the once-relentless pace of price growth in the two largest markets may finally be encountering resistance as buyers hit affordability barriers.
Smaller Capital Cities Still Surging
While growth is cooling in Sydney and Melbourne, Australia’s smaller capitals continue to surge. Tight stock levels and strong buyer demand are fuelling notable gains:
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Brisbane: Up 1.8% to $1.1 million
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Perth: Up 2.4% to $955,832
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Canberra: Up 0.7% to $1.035 million
Cotality’s research director, Tim Lawless, notes that these markets are increasingly diverging from the larger cities. With housing values rising at roughly four times the pace of wage growth, affordability continues to deteriorate—yet demand in many smaller cities remains unwavering.
Affordability Pressures Could Slow 2026 Growth
Lawless explained that affordability constraints, paired with recent economic developments, may temper price growth heading into 2026. Higher-than-expected inflation figures in November have dampened hopes of further interest-rate cuts, while the Australian Prudential Regulation Authority (APRA) has signalled tighter lending standards for investors.
“With housing affordability already stretched and worsening, it stands to reason that fewer borrowers will be able to access credit as serviceability barriers become more prominent,” Lawless said.
Regional Markets Continue to Outperform
Australia’s regional areas remain the strongest performers, outpacing capital city growth by a wide margin. Over the past year:
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Mildura (VIC): +18.5%
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Granite Belt (QLD): +19.7%
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Albany (WA): +22.6%
These figures reflect sustained demand for lifestyle regions and more affordable housing options outside metropolitan hubs.
Homeowners Make Record Extra Mortgage Payments
In a significant shift, Australians have paid a record $51.6 billion in extra mortgage repayments over the past year. This trend is supported by a drop in interest charges for the first time since 2022, with owner-occupiers paying $700 million less in the September quarter compared to June.
The Reserve Bank has reduced the cash rate by 0.75 percentage points since February, which has lowered monthly mortgage repayments by nearly $300 on a typical $600,000 loan. Rather than pocketing the savings, many borrowers are choosing to repay debt faster, significantly boosting “excess” mortgage payments to a massive $14.1 billion in the September quarter alone—one of the biggest increases on record.
What It Means for the Economy
While high mortgage repayments typically dampen consumer spending, economists still expect 0.5% growth in household expenditure for the September quarter. Combined with strong business investment—driven largely by data-centre expansion—and a surge in new housing construction, GDP growth is expected to exceed 2.1% over the past year, marking the strongest performance since early 2023.
