Australian dwelling values rose by 0.5% in May, lifting the national index 1.7% higher over the first five months of 2025. The gains were widespread, with every capital city recording an increase of at least 0.4% for the month.
"The continued momentum we're seeing across almost all markets is no doubt being fuelled by rate cuts – both those that have already happened, but also potential cuts in the coming months," said Tim Lawless, Cotality's research director, who also noted that auction clearance rates have picked up following the RBA's May board meeting.
This latest increase follows a brief and shallow decline of just 0.4% over the three months ending January 2025. The February rate cut has been a key driver behind the recent uplift in housing values.
"With interest rates falling again in May, we are likely to see a further positive influence flowing through to housing values in June and through the rest of the year."
Only Melbourne (-1.2%) and Canberra (-0.7%) have recorded annual declines in dwelling values, underscoring the market's resilience amid elevated interest rates and ongoing cost-of-living pressures.
Interestingly, Melbourne's quarterly price growth has now outpaced Sydney's, supporting previous remarks by Century 21 Australasia Chairman Charles Tarbey. "Investors would be wise to watch the Melbourne market – it could be a strong performer going forward," he said.
Tarbey also noted that while falling interest rates are likely to stimulate buying activity, ongoing supply issues could further push prices higher.
"6 to 10% growth in property prices is very possible if supply-side constraints persist," he said. "Government regulations and high construction costs are not helping the situation. Australia is an attractive place to live and invest, but we simply aren't building enough homes."
While Tarbey remains bullish on housing price growth over the next 12 months, he warned that global economic shocks could quickly change the outlook.
"Globalisation means Australia is deeply interconnected with the rest of the world. The Global Financial Crisis is a prime example – property prices fell 8.5% in just 11 months. There are many challenges around the world today that could, at any moment, disrupt the global economy."
From July 1, the First Home Guarantee scheme will expand to allow more buyers to purchase a home with as little as a 5% deposit – without the need for lenders mortgage insurance (LMI). Many analysts expect this to spur increased activity among first home buyers.
However, Tarbey cautioned that underlying market conditions remain difficult for new entrants.
"What's often overlooked are the price barriers first home buyers face regardless of grants or guarantees. Prices remain at historic highs in many markets, and if we see another 10% increase this year, those barriers will likely only grow and that may be coupled with more first home buyer competition due to the guarantee.
He encouraged first-time buyers struggling to get into the market to consider alternatives such as rentvesting – renting where they want to live while buying in more affordable areas as an investment strategy.
However, he cautioned to be strategic with purchasing in an affordable area.
"Don't just buy any old property to get into the market. There are still good and bad buying decisions to be made," he said.
"My key advice is to focus not solely on yield, but on achieving a balance between expected capital growth and steady rental income. Capital growth potential is often underestimated but can be the key to turning a good investment into a great one," Tarbey concluded.