Well, that’s a wrap on 2025 and what a year it was for the property market. Let’s take a look at some of the highlights from 2025 and see what aspiring property purchasers can expect from 2026.
Looking back on 2025
Interest rates came down
The Reserve Bank of Australia (RBA) started the year with a bang, with a cash rate cut in February of 0.25 per cent to 4.10 per cent.
Rates held steady in April, but borrowers celebrated again in May, when the RBA cut the cash rate a further 0.25 per cent to 3.85 per cent.
The third and final cash rate cut for the year came in August, when the RBA reduced it by 0.25 per cent to 3.60 per cent. Since then, the cash rate has remained on hold.
Inflation
Inflation has taken Australians on a bit of a rollercoaster ride this year. It kicked off 2025 at 2.4 per cent in the March quarter, easing to 2.1 per cent by June – a welcome sign that things were stabilising.
But the calm didn’t last for long. By September, inflation had climbed back up to 3.2 per cent, with the Consumer Price Index rising 1.3 per cent for the quarter, which was the sharpest quarterly increase since March 2023.
Then came October, when inflation jumped again to 3.8 per cent, signalling renewed pressure across the economy.
Considering the RBA’s target band of 2–3 per cent, this upward trend is far from ideal and continues to shape both economic policy and household budgets.
Property prices
Property prices across Australia soared throughout 2025, driven by rate cuts, low supply and government incentives.
By October, Australia’s home value growth hit the fastest pace in more than two years throughout the month, surging 1.1 per cent, according to Cotality. That marked the strongest monthly gain since June 2023 and pushed the annual growth rate to 6.1 per cent.
Prices continued their upward trend in November, rising 1 per cent nationally and pushing year-to-date growth up to 7.7 per cent.
Overall, national dwelling values are set to close 2025 at least 8 per cent higher. Darwin, Brisbane and Perth were Australia’s top-performing capitals, outpacing Sydney and Melbourne.
New housing initiatives
Government incentives designed to help more Australians get into the market moved the goal posts in 2025.
From October, the Australian Government’s 5% Home Guarantee Deposit Scheme was expanded to include all first home buyers, replacing the former Home Guarantee Scheme. Income caps were removed, property price caps increased, and the scheme became unlimited, meaning any first-home buyer with a 5 per cent deposit could apply.
The Help to Buy Scheme launched on 5 December 2025, with 10,000 spots available each year. Eligible home buyers can purchase with as little as 2 per cent deposit. The Australian Government will contribute up to 30 per cent for existing homes or 40 per cent for newly built homes towards the purchase price. Although, property price and income caps apply in this scheme.
Rents increased
Rents continued to climb in 2025. The median weekly rental value across Australia’s combined capital cities is now $702 per week putting even more pressure on tenants already feeling the squeeze.
Outside the cities, the picture is a little kinder. Regional rents remain noticeably lower, still sitting below $600 a week, offering some welcome relief for those willing to look beyond metropolitan areas.
What’s ahead in 2026
Interest rates may remain stagnant
With recent inflation data shaking things up, economists have now revised their forecasts for where interest rates are headed in 2026.
Experts predict that the cash rate will remain on hold at 3.60 per cent for an extended period.
Although, some economists are forecasting further cuts, with predictions that the cash rate will fall to 3.35 per cent by June next year and to 3.1 per cent by September 2026.
APRA’s high-DTI cap comes in
From 1 February 2026, the Australian Prudential Regulatory Authority will introduce a new 20 per cent cap on mortgages with a debt-to-income (DTI) ratio of six or more, with separate limits applying to owner-occupiers and investors.
This means it could become more difficult for higher-risk borrowers to secure finance when lenders are nearing their cap. Although, most borrowers currently remain well below this threshold.
Market conditions may be more restrained
According to Cotality, market conditions may be more restrained in 2026, as borrowing capacity, affordability and credit assessments impact demand. National property listings remain 18 per cent below the five-year average.
“Supply remains tight, but the demand environment is shifting,” Cotality Australia head of research Eliza Owen said.
“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.
“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.”
Together, these factors paint a picture of a property market entering a more cautious phase. While opportunities will still emerge, particularly in lower-value markets, buyers and investors may need to navigate 2026 with a more strategic, measured approach.
Like to chat through your finance options?
After a year of economic shifts and rate changes, 2026 is shaping up to bring fresh opportunities. Whether you’re thinking about refinancing, buying a home or making your next investment move, being informed and having your finances in good shape will make all the difference.
If you’d like to explore your 2026 plans and the finance options available to you, get in touch today.