Housing Supply Tightens - and the Surge Hasn’t Even Started Yet

Australian Housing Market Update – July 2025

Australia’s housing market continued its upward march in July, with every capital city recording a lift in dwelling values. Darwin led the charge with a 2.2% rise, followed by Perth (+0.9%) and Brisbane (+0.7%). Even slower-moving markets like Melbourne, Hobart, and the ACT posted modest gains between 0.1% and 0.5%.

Year to date, Darwin is up 9.7%, and Perth is growing at its fastest pace in nearly a year. National values have climbed 1.8% over the past three months—the strongest quarterly result since mid-2024.

But here’s the key: this growth is happening before interest rates have meaningfully declined.

The Real Driver? Supply is Strangling the Market

Behind the steady price rise is a critical imbalance between supply and demand:

• Listings are 19% below their five-year average
• Sales are nearly 2% above average
• Total listings dropped 3% in July alone
• Distressed listings have fallen year-on-year, particularly in QLD and WA

The national housing market is now being defined by tight supply, strong buyer activity, and limited financial distress. That’s a potent mix—and it's pushing prices upward despite still-restrictive interest rates.

In fact, SQM Research data shows all major capitals have fewer listings than a year ago, with some seeing double-digit declines. Hobart (-14.3%), Canberra (-9.1%), and Brisbane (-6.1%) are standout examples of shrinking availability.

Houses Lead, Units Lag

Buyer preferences remain firmly tilted toward detached homes:

• Houses are up 1.9% for the quarter, compared to 1.4% for units
• The price gap between houses and units is now at a record 32.3%, or around $223,000

This reflects a growing demand for land, space, and standalone living—a trend unlikely to reverse in the short term given the scarcity of new freestanding supply.

What Happens When Rates Actually Fall?

The RBA cut rates to 3.6% last week, but the real impact on property prices is still ahead of us.

Historically, Australian property markets peak 12–18 months after the first rate cut. It’s a consistent pattern:

• After the GFC in 2008, prices surged within a year of the first cut
• Following the COVID downturn, values rose steeply after a 6–12 month lag

Why? Because borrowing capacity, buyer confidence, and investor activity all build gradually—but inevitably—once the cost of capital falls.

This cycle is no different. We’re only in the early innings of a multi-phase rebound. As rates continue to drift lower and lending conditions loosen, price growth is likely to accelerate into 2026.

Spring Surge Is Just the Beginning