The winners and losers in Australian residential real estate in 2025

Australia’s housing market staged a turnaround in 2025, defying intense affordability and cost-of-living pressures to deliver an above-decade-average growth rate of 7.7% through the year-to-date.

Cotality’s annual Best of the Best report, a detailed nationwide breakdown of the suburbs that rose fastest, had the highest rent return or offered the most accessible entry points, identifies which markets led the year’s recovery.

National dwelling values are set to close 2025 at least eight per cent higher, a result Cotality Australia Head of Research Eliza Owen says highlights how quickly conditions shifted after a challenging start.

“Markets entered 2025 under considerable pressure. Affordability had hit a series high, serviceability was stretched and price growth had flattened out. What followed was an unexpectedly strong rebound as interest rate cuts, easing inflation and limited supply reignited competition,” Ms Owen said.

Three rate cuts, an expansion of the 5% Home Guarantee Deposit Scheme and persistently low listing volumes helped drive the recovery, with the housing market recording three consecutive months of growth of at least 1% by November and reaching a new high of $12 trillion.

Owen said the turnaround was most visible across lower-value markets and regions where buyers were able to respond quickly to more favourable credit conditions.

“Tight supply meant even modest demand created upward pressure on prices. Cheaper markets were had the most acceleration because they remained within reach for buyers navigating higher living costs,” she said.

Prestige Sydney remains Australia’s price leader

Sydney’s top-end suburbs sat in their own price bracket in 2025, widening the gap between premium enclaves and the rest of the country.

Point Piper led the national list with a median house value of $17.3 million and unit medians above $3.1 million, followed by long-established areas such as Bellevue Hill, Vaucluse,

Tamarama and Rose Bay.

Owen said the resilience of premium Sydney markets was in sharp contrast to affordability pressures elsewhere.

“Affordability constraints were a defining feature of 2025, yet premium markets continued to operate on their own cycle. These suburbs are far less sensitive to borrowing costs and

listing trends, which is why their performance often diverges from the broader market,” she said.

Mosman recorded the highest total value of house sales nationally at $1.58 billion across 229 transactions, underlining the scale of turnover even in a year of strained serviceability.

Lower-value suburbs delivered the strongest gains

Western Australia dominated high house value growth in 2025, with Kalbarri increasing 40.2% to $515,378 followed by Rangeway (32.2%) and Lockyer (32.0%).

Similar trends emerged in the unit market, with strong results concentrated in Queensland’s mid-priced regions such as Cranbrook (up 29.3%) and Wilsonton (up 26.9%).

Ms Owen said the performance of these markets highlighted the role of affordability at a time of constrained borrowing power.

“Lower value areas offered buyers an opportunity to get into the market if they had the capacity to service a mortgage. Once interest rate cuts started to flow through, demand lifted

quickly in those areas where prices had further room to grow,” she said.

“Investors were a particularly strong driver of demand in markets across WA and QLD, where the share of new mortgage lending to investors reached 38.3% and 41.1%

respectively.”

Perth, Brisbane and Darwin lead capital-city upswing

Darwin posted the strongest rise among the capitals at 17.1% through the year-to-date, following a flat result in 2024, joined by Brisbane and Perth as Australia’s three top-performing capital cities.

The fastest growing capital-city suburb for houses was Mandogalup in Perth (up 33.0% to $944,609), alongside several outer Darwin suburbs where more moderate entry points below $600,000 supported stronger value growth.

The most affordable capital-city suburbs for houses were clustered around Greater Hobart, including Gagebrook, Herdsmans Cove and Bridgewater, all with medians under $450,000.

Suburbs in Adelaide and Darwin provided some of the best value for unit buyers, with medians ranging from less than $250,000 in Hackham, Adelaide to $328,416 for Karama in Darwin.

Biggest gains and the steepest falls in regional Australia

Strong upswings in WA and Queensland contrasted with declines in other regional pockets.

House values fell 11.6% in Millthorpe (NSW) and 10.5% in Tennant Creek (NT) while several unit markets recorded annual declines, including South Hedland (down 14.1%) and Mulwala (down 11.8%).

Owen said these differences reflected the uneven backdrop of supply levels, migration flows and localised demand.

“Some regional areas are still benefiting from relative affordability and tight rental conditions.

Others are adjusting to earlier periods of rapid growth or shifts in local economic activity,” she said.

Mining towns produced the highest yields

Rental demand remained firm across key resource corridors in regional WA and parts of regional Queensland, where constrained supply, strong employment bases and short-stay

workforces contributed to some of the highest yields in the country.

Newman, in the Pilbara, delivered the strongest house yields at 12.6%, reflecting demand linked to iron ore operations, Kambalda East, near the Goldfields mining belt, followed at

12.2%, supported by nickel and gold activity.

Unit yields were even stronger, with South Hedland leading the country at 17.8%, while Newman recorded 14.3% and Pegs Creek recorded 13.2%, as apartment stock is limited

and worker demand remains consistent.

Pegs Creek, located in Karratha, recorded a 23.5% increase in house rents over the year and Rockhampton City recorded a 21.1% jump in unit rents.

Constraints to shape 2026

Market conditions are expected to be more restrained in 2026 as borrowing capacity, affordability and credit assessments place limitations on demand.

National listings remain 18% below the five-year average and new housing completions continue to trail household formation, maintaining the structural imbalance that supported

stronger conditions in 2025.

Owen said that imbalance alone is not enough to drive the same level of growth next year.

“Supply remains tight, but the demand environment is shifting. Inflation forecasts have been revised higher, interest rate expectations have adjusted with them, and households are

facing stricter borrowing assessments. Those factors can temper buyer activity even when stock levels are low,” she said.

“Lower value markets may still outperform because they carry less sensitivity to credit constraints, but overall growth is likely to be more measured compared with 2025.”

Key findings – Cotality Best of The Best (BoB) 2025

Lower-value suburbs delivered the strongest value gains, led by Kalbarri (WA), up 40.2% for houses, and Cranbrook (Qld), up 29.3% for units.

Sydney’s premium suburbs remained the country’s highest value markets, with Point Piper recording a house median of $17.3 million and unit median of more than $3.1

million.

Mosman recorded the highest total value of house sales nationally, with $1.58 billion transacted across 229 sales.

WA’s resource-linked towns produced the nation’s strongest rental yields, with Newman at 12.6% for houses and South Hedland at 17.8% for units.

Pegs Creek (WA) had the highest annual house rent increase at 23.5%, unit rents rose the highest in Rockhampton (QLD), up 21.1%.

Australia’s major CBD office markets are recording some of their strongest rental growth since the pandemic, with businesses increasingly prioritising premium office space despite elevated geopolitical and economic uncertainty.

Knight Frank’s Australian Office Indicators Q1 2026 report found net effective rents in Sydney and Melbourne CBDs rose at their fastest annual pace since COVID-19, increasing 10.2 per cent and 6.8 per cent respectively over the 12 months to March.

Brisbane posted the strongest growth nationally, with net effective rents climbing 11.7 per cent over the same period.

The report points to a widening divide between prime CBD office towers and secondary office stock, as occupiers increasingly focus on quality, location and workplace amenity when making leasing decisions.

Knight Frank Senior Economist, Research & Consulting Alistair Read said demand remained heavily concentrated in premium assets within core CBD precincts, helping drive stronger rental growth in top-tier buildings.

“Occupier demand continues to be heavily concentrated in the most desirable CBD precincts and the highest-quality buildings, accelerating a sharp divergence between core and non-core markets,” Mr Read said.

According to the report, Sydney’s Core precinct and Melbourne’s Eastern Core significantly outperformed broader CBD markets over the past year.

“In Sydney’s Core precinct and Melbourne’s Eastern Core, net effective rents surged 14.3% and 16.1% over the past year, significantly outperforming the rest-of-CBD precincts,” Mr Read said.

The rental gap between prime and non-prime office locations has also continued to widen sharply.

“As a result, core CBD rents are now 54% higher than non-core locations in Sydney and 93% higher in Melbourne, highlighting the growing premium placed on amenity, accessibility and workplace quality,” he said.

Knight Frank said the strong rental growth across the major CBDs was being underpinned by a limited supply pipeline, with few new office developments expected to be delivered in the near term.

Mr Read said subdued construction activity was likely to support ongoing rental growth and tighter vacancy rates over the medium term, particularly for premium office towers.

“The combination of sustained demand and declining levels of new development will aid ongoing prime rental growth and lower vacancy rates over the medium term, particularly for best-in-class assets,” he said.

The report noted that current economic conditions were making new office developments increasingly difficult to justify financially.

“Economic rents remain well above expected market rents, making the construction of new office towers largely unviable, and concentrating tenant demand into existing buildings,” Mr Read said.

While suburban office markets generally remained subdued compared with CBDs, Melbourne’s Southbank precinct was identified as a relative outperformer, recording annual net effective rental growth of 2.7 per cent.

The report comes as broader Asia-Pacific office markets continue to stabilise following several years of disruption linked to hybrid work trends, inflation and rising interest rates.

Knight Frank’s separate Asia-Pacific Q1 2026 Office Highlights report found Sydney and Brisbane were among the strongest-performing office rental markets in the region, behind only Bengaluru and Tokyo for annual prime net face rental growth.

The Asia-Pacific report also found 18 of the 24 cities monitored across the region recorded stable or increasing rents in the first quarter of 2026, even as geopolitical uncertainty intensified following escalating conflict in the Middle East.