National house prices continued to climb in May, as interest rate cuts stoked demand and strengthened buyer sentiment, according to Cotality’s latest Home Value Index.
Growth in all capital cities
The index rose 0.5% in May, taking cumulative gains for 2025 to 1.7%. All capital cities recorded growth of at least 0.4% over the month.
Cotality’s head of research Eliza Owen said further rate cuts anticipated this year could lift combined capital city dwelling values by 6% to 10% by early 2026, though she cautioned that affordability constraints, rising unemployment and weak wage growth could temper gains.
“There’s a boost to borrowing capacity from lower interest rates,” Owen said, “but affordability remains a concern, especially as median capital city house values now exceed A$1 million.”
SQM Research managing director Louis Christopher expects the Reserve Bank of Australia to cut the cash rate again in July, potentially by 50 basis points.
He forecasts capital city dwelling value growth between 6% and 10% next year, led by Perth, Brisbane and Adelaide, where housing shortages are acute.
Investor and first home buyer demand is rising ahead of new federal government incentives set to begin in 2026.
Mortgage broker Gino Farina noted increased borrowing capacity is lifting confidence and buyer interest, particularly from first-time entrants leveraging government schemes.
Despite slowing annual growth – now 3.3%, the weakest since August 2023 – Melbourne and Canberra have returned to monthly price gains following earlier declines.
Regional markets also gain
Meanwhile, regional markets also posted gains, led by South Australia, up 3.8% year to date.
Rental markets have softened slightly, with annual rent growth slowing to around 3–3.5%, down from 8% previously.
But vacancy rates remain under 2%, which has led to more shared housing arrangements as renters adapt to the reality of affordability pressures.