Australia’s brief rate‑cutting cycle in 2025 has left a clear imprint on the housing market, with new PropTrack data showing the nation’s median home value rose about 8% over the year – but with gains heavily skewed towards cheaper suburbs and investor hotspots.
The Reserve Bank cut the cash rate three times last year before reversing course as inflation flared again, pushing borrowing costs higher in early 2026. While lower rates boosted buyers’ budgets, they didn’t lift all markets equally.
REA Group executive manager of economics Angus Moore (pictured) said both borrowing power and local conditions determined where prices surged.
“What people can afford, which is a function of interest rates and incomes, is the key driver of home prices,” Moore said in a new PropTrack analysis. “Rate cuts we saw last year boosted borrowing capacities and that has been an important factor supporting home prices.”
Cities with the leanest stock levels – Perth, Adelaide and Brisbane – recorded some of the strongest house‑price growth. But in those markets, rapid gains more than offset the benefit of cheaper debt.
“Notably, Brisbane, Perth, and Adelaide saw prices grow by more than borrowing capacities,” Moore said. “Even with the rate cuts, affordability deteriorated.”
In Brisbane, several Ipswich suburbs where houses typically sell for under $800,000 ranked among the city’s top performers, yet premium Yeronga still led the pack with a 35% jump.
In Perth and Adelaide, many of the fastest‑rising suburbs now sit in the $1–2 million bracket, suggesting equity‑rich owners have been trading up after several strong years of capital growth.
PropTrack data shows many of the suburbs with the fastest growth during the cutting phase were among the most affordable in their local areas.
“The theme we have been seeing in recent years is the outperformance of more affordable homes,” Moore said.
Lower rates can have an outsized impact in cheaper markets where buyers are closest to their borrowing limits. Even modest boosts to capacity can unleash extra demand, particularly from investors chasing strong rents.
“Rental market conditions have been very tight and rents have been growing very quickly and that's been encouraging a lot of investors around Australia,” Moore said.
That dynamic is visible in unit markets and townhouse corridors. In Sydney’s south‑west, LJ Hooker Liverpool director Larissa Schembri said attached homes are drawing budget‑conscious buyers.
“House prices have gone up, but townhouses are a lot more affordable,” Schembri said. “They’re a good starter for young couples and young families.”
Regional hubs have also benefited, with value hunters pushing prices sharply higher in towns such as Derby, Ballarat, Stawell, Devonport and Port Sorell after discovering their relative affordability and lifestyle appeal.
Whether the powerful combination of earlier rate cuts, tight rental markets, and equity‑fuelled upgrading can continue driving prices higher is uncertain. Moore said the interest‑rate outlook will hinge on inflation, noting that “market pricing at the moment is for about a 50% chance of a second rate rise by the end of the year.”
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