The 7 key insights into the Australian property market you need to know
Leading Australian economist Dr Shane Oliver navigates the complicated residential property market for buyers and investors
3 min
Australian home values rose by 1.6 percent over the March quarter following an 8.1 percent increase in 2023, according to CoreLogic data. Historically, home prices have typically fallen as interest rates rise, but the opposite has occurred due to a lack of supply and high demand turbocharged by immigration.
While the optimists theorise that property doubles every seven years, pessimists talk about a bubble and inevitable crash. But AMP chief economist Shane Oliver says the Australian housing market “remains far more complicated than optimists and doomsters portray it to be”.
Here is a summary of Dr Oliver’s 7 key observations regarding Australian property.
1. It’s very expensive
This has been the case since the early 2000s but it’s been getting worse. House price-to-income ratios have doubled since the year 2000. The 2023 Demographia Housing Affordability Survey shows the median multiple of house prices to income at 8.2 times versus around five in the US and UK. The years taken to save a 20 percent deposit for an average full-time wage earner have doubled from five years 30 years ago to 10 years now. The expensive nature of Australian property … is leading to rising wealth and intergenerational inequality.
2. It’s very diverse
This has been seen recently with rapid relative price growth in Adelaide, Brisbane and Perth. This divergence partly reflects a combination of better housing affordability and relative population growth, with Brisbane and Perth benefitting from interstate migration.
3. Mortgage arrears remain low (for now at least)
The low level of arrears partly reflects strong lending standards in Australia combined with the strong jobs market and a high level of savings buffers coming out of the pandemic. That said, arrears are starting to pick up and the risks will rise as buffers run down, scope to cut discretionary spending is exhausted and if the labour market deteriorates significantly.
4. Interest rates still matter
The downtrend in mortgage rates since the late 1980s underpinned the surge in property prices over the same period as it enabled buyers to borrow more relative to their incomes. And rate hikes have been associated with cyclical price falls with rate cuts usually needed for upswings. But of course, the impact of interest rates can be swamped by other factors at times, as has been the case over the last year. Price gains are expected to be around five percent this year with high rates dragging but the supply shortfall supporting prices.
5. It’s chronically undersupplied
This has been the case since the mid-2000s when immigration levels, and hence population growth, surged and the supply of new homes did not keep up. The pandemic’s freeze on immigration provided a brief relief but this was offset by a fall in the number of people per household and the problem has worsened with reopening leading to record immigration levels. This has pushed underlying housing demand to around 250,000 dwellings p.a. at a time when home completions are around 170,000 dwellings a year. So, the shortfall of homes is getting worse and likely to reach 200,000 dwellings by June.
6. Forecasting swings in home prices is hard
Failed property crash calls have been a dime a dozen over the last two decades and forecasting property swings has been hard. For example, Reserve Bank Governor Michele Bullock noted last month that “I wouldn’t like to predict housing prices … every time we tried … we seem to get it wrong…”.
7. Property has similar long–term returns to shares
[Since 1926] both shares and property return around 11 percent pa. Property’s low correlation with shares, lower volatility but lower liquidity makes it a good portfolio diversifier. So, there is clearly a role for it in investors’ portfolios.
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Strong rental fundamentals and tight supply have driven more than $155 million in Sydney apartment block and residential investment sales over the past year.
2 min
Sydney’s residential investment market has recorded $155 million in apartment block and townhouse sales over 2025, underscoring continued investor confidence in rental-led assets despite broader economic uncertainty.
The transactions were completed by Knight Frank’s Investment Sales agents James Masselos and Adam Droubi, who negotiated 19 sales across Sydney during the year.
Residential investments accounted for 75 per cent of their total sales activity, supported by more than 4,200 active purchaser enquiries.
Co-living deal sets national benchmark
Among the standout transactions was the off-market sale of 142 Carillon Avenue in Newtown, a 37-studio co-living apartment block located close to the University of Sydney and Royal Prince Alfred Hospital.
The property sold for $21.5 million, setting a new benchmark for the living sectors market nationally.
The deal achieved approximately $581,000 per bedroom, believed to be one of the highest per-bedroom results recorded for a co-living asset in Australia.
Inner-city assets trade in one line
Other notable sales included a group of 12 townhouses at 108 Illawarra Road in Marrickville, sold in one line for $14 million, and a block of 20 studio apartments at 171 Rowntree Street in Birchgrove, which changed hands for $6.7 million.
Both transactions reflected strong buyer competition for well-located residential assets with established income streams.
Supply constraints underpin momentum
Mr Masselos said Sydney’s apartment block market continued to benefit from tight supply and strong rental conditions.
“Apartment blocks and broader residential investments remain a robust asset class, underpinned by strong rental growth, record low vacancy levels and scarcity of stock,” he said.
He added that more than $25 million worth of residential investment opportunities are expected to come to market in 2026, with buyer enquiry remaining elevated.
Mr Droubi said competitive sales campaigns had become a feature of the market as investors sought secure income and long-term value.
“Supply constraints and ongoing population growth underpin market strength,” he said. “New approvals and completions lag demand, keeping stock tight and boosting both rents and prices.”
Vacancy rates keep pressure on rents
According to Knight Frank, rental demand across Sydney remains intense, with vacancy rates well below typical “healthy” levels.
Many middle and outer-ring suburbs are recording vacancies of around 1.5 per cent or lower, maintaining upward pressure on rents and reinforcing the appeal of residential investment assets.
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