'Momentum is building': Home price growth accelerates in Australia's largest cities

The housing market upswing is getting stronger, with price growth quickening and home values smashing records.

The pace of home price growth accelerated last month off the back of interest rate cuts and new buyer incentives, according to the PropTrack Home Price Index.

The national median value grew by 0.6% in October, which was the fastest rate of monthly price growth recorded so far this year.

Values are now sitting 7.5% higher than a year ago – an annual rate of price growth not seen since May last year.

Prices rose in every capital city and region in October and are at record highs in all capitals except Hobart and Canberra.

The market’s stronger growth comes after three interest rate cuts from the RBA this year in February, May and August, which reduced typical interest rates paid on variable mortgages by a total of 75 basis points.

As a result, buyers taking out a loan to purchase a home now have more money to spend, with lower interest rates improving borrowing capacities.

Those rate cuts have coincided with a change in sentiment in the market, with more buyers now expecting prices to rise higher.

PropTrack senior economist Eleanor Creagh said stronger competition in the housing market had pushed prices to record levels.

“Increased borrowing capacities, lower mortgage rates and improving sentiment are fuelling renewed competition,” she said.

“Market momentum is building amid renewed buyer confidence and improved sentiment, buoyed by earlier rate cuts.”

The recent expansion of the Home Guarantee Scheme, which allows first-home buyers to purchase with a smaller deposit, was expected to further bolster demand, Ms Creagh said.

“The market appears set for further gains through spring and into summer,” she said.

“With stock on market constrained and new supply challenged, conditions remain tilted toward sellers.”

The data shows that the smaller capitals are still topping the charts for price growth, led by Darwin where the median home value has grown by 12.8% in the past year.

Brisbane (12.6%), Perth (11.8%) and Adelaide (10.3%) weren’t far behind, with Adelaide recording a 1.2% lift in prices in October alone – the fastest monthly growth of all the capitals.

These three cities have been the strongest housing markets in recent years, partly a result of the high interest rate environment and challenged housing affordability pushing more buyers and investors towards cities and regions where properties have historically been cheaper.

Big cities gathering steam

But the situation appears to be changing, with previously-lagging markets now catching up.

“The pattern of growth is shifting,” Ms Creagh said. “Over the past year, Darwin, Hobart, Melbourne and Sydney have seen the fastest acceleration in annual gains, as previously softer markets regain momentum.”

Home prices in Sydney grew by 0.6% in October and 6.4% in the past year – the fastest annual rate of growth recorded in about a year and a half.

Values in the harbour city are sitting at a record high, with a typical house now worth $1.622 million and a unit worth $874,000.

Pockets of Sydney recorded among the fastest quarterly price growth in the nation, with prices growing by about 4% in the eastern suburbs and Parramatta, and 3.5% in the inner south west in the past three months alone.

Meanwhile, Melbourne prices have entered uncharted territory, with the city’s median value eclipsing the previous high reached in early 2022 before rate rises triggered an extended downturn.

Prices are up 4.6% compared to a year ago – an annual rate of growth not seen for more than three years.

Melbourne’s price growth is playing catch up after an extended period falling behind the other capitals, with its median value surpassed by Brisbane, Perth and Adelaide in the past year and a half.

Like Darwin, Melbourne has been targeted this year by interstate investors buying the dip in values that occurred since interest rates were first increased in early 2022.

Prices have risen fastest in the northwest, up 6% in the past year, with the most rapid price rises in suburbs where homes are typically more affordable.

Real estate agent and Barry Plant Glenroy director Roy Khoder said first-home buyers in Melbourne’s northwest were facing competition from investors from NSW targeting more-affordable properties.

“There’s more than couple of interstate investors at the moment.,” he said. “They’re finding good value for money compared to where they’re living.”

He said further strong price growth was expected in the months ahead

“I think we’re in for a good 2026,” he said.

Prices rising in sync

Ms Creagh said lower borrowing costs and increased competition for fewer homes had led to prices rising across the board.

“The current upswing is a synchronised expansion, underpinned by lower rates and constrained supply, with a broad-based lift in prices across the country.”

Although higher-than-expected inflation data last week poured cold water on expectations of a Melbourne Cup rate cut, the housing market still looks set to gallop ahead for the rest of the year.