Overview
- Australian home values rose 0.8% in January.
- Sydney and Melbourne weighed on the headline results with marginal gains following slight falls in December.
- Mid-sized capitals continued their solid growth run despite some momentum leaving the upswing in these cities.
- Mounting affordability and credit headwinds now clash with fragile sentiment.
- Prices remain supported by low supply levels, first home buyer incentives and a resilient labour market.
Australian home values rose by 0.8% in January according to Cotality’s Home Value Index, a subtle acceleration from the 0.6% increase recorded in December. While every capital city and broad rest of state region recorded an increase in home values through the month, the start of the year returned a mixed result.
Home Value Index
Sydney and Melbourne are weighing on the headline numbers, recording a 0.2% and 0.1% increase respectively in January; a marginal pickup following the slight falls recorded in December. Both markets have values slightly down on their peak levels, with Sydney -0.1% below the November 2025 peak and Melbourne values remaining 0.7% lower than record highs recorded in March 2022.
The mid-sized capitals have continued their solid growth run, however some momentum has left the upswing in these cities as well. Perth values were 2.0% higher in January, the strongest gain across the capitals, but well below the cyclical high of 2.9% MoM growth recorded in November last year. Similarly, Brisbane’s monthly gain has slowed from 2.0% in October last year to 1.6% in January, and Adelaide’s monthly increase dropped back to 1.2% from a 1.8% rise in December.
Tim Lawless, Cotality’s research director, noted the market’s resilience, but suggests further momentum is likely to leave the market. “Despite the most unaffordable conditions on record in many cities, along with a rebound in cost of living pressures and prospect of a rate hike as early as this Tuesday, we are still seeing a broad-based rise in housing values,” he said.
“The ongoing capital gains reflect persistently low inventory in the face of above average housing demand, however we are likely to see demand side pressures gradually ease in 2026.”
“Affordability and serviceability constraints are likely to naturally dampen demand, but also renewed cost of living pressures and a strong chance that interest rates will rise. There is also slowing population growth to consider.”
Cotality estimates the number of homes advertised for sale was 19% below levels at the same time last year, and 25% below the five-year average for this time of year. At the same time, the rolling quarterly number of home sales was estimated to be 2.7% higher than a year ago and only 1.8% below the five-year average.
Digging a little deeper, most cities are continuing to see homes at the lower end of the value spectrum supporting growth, especially for houses. Across the combined capitals, lower quartile house values were up 1.3% in January compared with a 0.3% rise across the upper quartile.
“This trend of stronger growth conditions at lower price points is supported by intense competition for more affordable houses,” said Mr Lawless.
“This is where first home buyers, investors and, progressively, mainstream demand is most concentrated.”
Regional markets have delivered a stronger growth outcome, with the combined regionals index up 1.0% in January compared with a 0.7% rise across the combined capitals.
