Omari Gates
Australia's housing market is one of the biggest in the world, with a value of $10 trillion as of August 2025. The market has seen significant growth over the years, with the median home value in the country reaching $732,886 during that month. Sydney is the most expensive city for residential property, with a median property value of approximately $1.19 million as of October 2024. However, the high house prices and rents in Australia have led to a housing crisis, with homeownership becoming increasingly unaffordable for many, especially the younger generation and low-income earners.
| Characteristics | Values |
|---|---|
| Average house price in Sydney | A$1.2m |
| Average house price across Australia's capital cities | A$900,000 |
| Average house price across Australia | A$851,386 |
| Average dwelling price in regional Australia | A$578,486 |
| Median-valued home in Australia | A$802,357 |
| Average weekly rent in Sydney | A$773 |
| Average weekly rent across Australia | A$537.1 |
| Total value of residential dwellings in Australia | A$11,032.2 billion |
| Number of residential dwellings in Australia | 11,294,300 |
| Mean price of residential dwellings in Australia | A$976,800 |
| Home value increase across Australia since the pandemic | 38.4% |
| Home value increase across capital cities since March 2020 | 33.6% |
| Home value increase across combined regional areas since March 2020 | 56.3% |
| Home value increase in Perth since March 2020 | 68.7% |
| Home value increase in Adelaide since March 2020 | 66.7% |
| Home value increase in Brisbane since March 2020 | 68.7% |
| Home value increase in Melbourne since March 2020 | 8.4% |
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What You'll Learn
Housing affordability crisis
Australia is currently facing a housing affordability crisis, with homeownership becoming increasingly difficult for many, especially the younger generation and low-income earners. The country's housing market has seen a steady increase in value, with the median home value reaching approximately $732,886 as of August 2025. This has resulted in a significant disparity between house prices and incomes, reflected in Australia's high house-price-to-income ratio of 121.7.
The high property prices in Australia are a pressing issue, with the median residential property value in cities like Sydney reaching approximately $1.19 million as of October 2024. The average price of residential dwellings in Australia was around $925,000 as of September 2023, the second-highest average price recorded in the last five years. This has made it challenging for median-income households to purchase properties, with affordability issues affecting access to the property ladder.
The situation is particularly dire in New South Wales, where a median-income household can only afford 10% of the homes sold across the state. Other states like Victoria, Tasmania, and Queensland are also facing affordability challenges, with median households able to afford only 12%, 9%, and 15% of homes, respectively. The time it takes to save for a deposit has also increased, with Sydney requiring up to 13 years, followed by Melbourne at 9.6 years.
Rising home values, stagnant income growth, and increasing rental costs have created a perfect storm for prospective buyers and renters. Rental affordability remains a challenge, with demand for housing continuing to rise. Cities like Sydney, Brisbane, and Adelaide have experienced rapid price growth, eroding affordability. As a result, long-term renting has become a reality for many, particularly the younger and lower-income populations.
The housing crisis has become a prominent issue in Australia's national elections, with both major parties proposing policies to attract voters. Labor has pledged to build 100,000 homes for first-time buyers and increase financial support. The Liberals have focused on training construction apprentices, investing in infrastructure, and allowing early pension withdrawals for housing deposits. However, critics argue that neither party seems prepared to address the root causes of the problem, and the crisis continues to deepen.
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Rising rents
Australia's housing market is valued at $10 trillion, with the median home value reaching $732,886 at the end of August 2025. The market continues to grow, with every capital city recording a spike in values for April. However, this growth in housing supply has not translated into increased affordability or accessibility for many Australians. House prices remain vastly disproportionate to income, and the share of mortgage holders at risk of repayment stress is climbing. As a result, long-term renting has become a reality for much of Australia's younger or lower-earning population.
Rental payments have increased over the past few years across Australia, with annual rent increases in all major cities topping 10% last year. Rents across Australia have risen at the fastest rate in at least 15 years, with annual rent increases calculated monthly topping 10% in late 2022 and early 2023. Sydney and Melbourne are currently experiencing surging rental markets, with Sydney rents the highest across the country's capital cities at an average of $680 per week as of December 2023.
Several factors are driving these rent increases. One significant factor is the shortage of building materials, which has slowed down construction and resulted in a lack of affordable and social housing. Additionally, there has been an increase in short-term rentals and a fresh surge in migration, adding to the demand for housing. The trend towards smaller households and higher-income growth for some has also contributed to rising rents.
The impact of rising rents is being felt disproportionately by low-income earners, who are being priced out of the market. Anglicare's Rental Affordability snapshot found just four rentals out of over 45,895 national listings were affordable for a single person receiving jobseeker payments. With inflation continuing to strain household finances, rental payments are becoming a heavier financial burden for many people nationwide.
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Housing supply and demand
Australia's housing market is characterised by a complex interplay of supply and demand dynamics, which have significant implications for home buyers and renters alike.
On the supply side, Australia has witnessed a severe housing shortage, with demand outstripping the available stock. This imbalance has been exacerbated by labour shortages, rising construction costs, and industry insolvencies, hindering the completion of new housing projects. The private sector, which is pivotal in delivering new housing, has struggled to keep up with demand, and higher interest rates have further deterred development due to increased borrowing costs. Consequently, the housing supply has failed to match the burgeoning demand, driving up prices and exacerbating affordability concerns.
Demand for housing in Australia remains robust, driven by various factors. Historically, Australians have exhibited a strong affinity for property ownership, viewing it as a means to build wealth. However, the disparity between house prices and incomes has widened, with house values in larger cities, such as Sydney, Brisbane, and Perth, experiencing substantial increases. This has made home ownership increasingly challenging, particularly for younger and lower-income individuals. As a result, long-term renting has become a reality for a significant portion of the population, contributing to high demand in the rental market.
The rental market in Australia has been characterised by rising rents and low vacancy rates. As of December 2023, Sydney recorded the highest average weekly rent among the capital cities, with rents in other regions also increasing. The share of household income spent on rent is considerable, with certain regions, like regional areas of Queensland, averaging 30% of household income allocated to rent. This has burdened many renters, especially with the added strain of inflation on their finances.
To alleviate the housing supply-demand imbalance, various approaches have been suggested. Independent property economist Cameron Kusher advocates for a paradigm shift in how Australians perceive housing, emphasising its essential role as shelter rather than solely a means to build wealth. Lowering land costs and encouraging higher-density housing developments could help temper home price growth and improve affordability. Additionally, a reduction in interest rates could alleviate some of the financial pressures on prospective homeowners and encourage new housing developments.
In conclusion, the housing supply and demand dynamics in Australia are intricate and multifaceted. The ongoing housing shortage, fuelled by construction challenges and high demand, has resulted in escalating house prices and rental costs. Addressing these issues requires a multifaceted approach, including shifts in perceptions, policy interventions, and industry adaptations, to ensure that housing becomes more accessible and affordable for Australians across diverse socioeconomic backgrounds.
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Impact on the economy
Australia's housing market has a significant impact on the country's economy. Housing is the biggest source of wealth for most Australian households, and the total value of residential property in the country is more than triple that of publicly listed securities. As a result, changes in house prices can have a substantial impact on Australia's Gross Domestic Product (GDP) and economic growth.
During the COVID-19 pandemic, Australia experienced one of the fastest and largest global economic contractions in recent memory. In response to the economic crisis, the government implemented measures to protect jobs and incomes, including banks pausing mortgage repayments and landlords deferring rents. These actions helped to stabilise the housing market and prevent a sharp decline in house prices. However, the long-term impact of the pandemic on the housing market is yet to be fully understood.
Australia's housing market is also influenced by global economic factors such as tariffs and trade policies. For example, the ongoing tariff war initiated by former US President Donald Trump has caused uncertainty in the market. While tariffs can slow down the global economy and offset inflationary pressures, they can also lead to increased construction costs, making housing less affordable for Australians. Additionally, a weaker Australian dollar can make Australian property more attractive to foreign buyers, increasing demand and supporting house prices.
The Australian government's policies and election promises also play a crucial role in shaping the housing market and the economy. Both the Labor Party and the Liberal-National Coalition have recognised the housing crisis and pledged to increase the housing supply and provide assistance to first-home buyers. However, critics argue that these measures may not be well-targeted and could lead to unintended consequences, such as further increasing housing demand and directing growth towards the outskirts of capital cities, with potential environmental and economic implications.
Migration is another factor that impacts the housing market and the economy. While some suggest that reducing migration could ease housing demand, others argue that it would negatively affect Australia's workforce and productivity. Increased migration, on the other hand, can boost demand for housing and support market conditions, especially if Australia is viewed as a stable country during times of global uncertainty.
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Government policies
Australia's housing market has been the subject of much debate and concern in recent times, with the federal election bringing the issue to the fore. The housing crisis has reached a critical point, with home ownership becoming increasingly difficult for many Australians, especially the younger generation and low-income earners. The market's size and value have reached unprecedented levels, eclipsing the market capitalisation of some of the world's biggest tech firms. As of August 2025, the value of the Australian property market rebounded to $10 trillion, with the median home value reaching $732,886.
- Underinvestment in Social Housing: Decades of underinvestment in social housing have resulted in a massive gap between demand and supply. Social housing accounts for only 4% of housing stock, which is significantly lower than what is needed to meet the demands of a growing population. This underinvestment has contributed to the overall scarcity of affordable housing options.
- Restrictive Planning Laws: Australia's restrictive planning laws have been criticised for hindering the development of housing in popular metropolitan areas. Cities like Melbourne and Sydney have lower density compared to other global cities due to red tape and regulatory obstacles, making it challenging to build homes where people want to live.
- Immigration Policies: The Coalition's focus on reducing immigration has been debated as a potential solution to the housing crisis. While it may marginally reduce housing demand and prices, it could have negative economic consequences in the long term, including higher taxes for Australians due to reduced revenue from skilled migrants.
- Foreign Homebuyers Crackdown: The federal government has recently taken steps to deter foreign homebuyers by tripling fees. However, this move has had little impact on the housing strain, as foreign buyers already faced stringent rules, and they represent a very small portion of the market (less than 1% of sales in 2022-23).
- Interest Rates and Mortgage Stress: While not a direct policy intervention, the impact of interest rate hikes on mortgage stress cannot be overlooked. Higher interest rates have made borrowing less appealing, and an increasing share of mortgage holders are at risk of repayment stress.
- State of the Land Report, 2025: According to the Urban Development Institute of Australia's report, the federal government is unlikely to meet its target of 1.2 million new homes by 2029, falling short by approximately 400,000. This highlights the gap between policy targets and actual outcomes in addressing the housing crisis.
While both major parties acknowledge the severity of the housing crisis, they have been hesitant to implement drastic measures to curb skyrocketing property values, recognising the complexity of the issue and the potential political consequences.
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Frequently asked questions
The housing market in Australia is huge. In August 2025, the value of the Australian property market rebounded to $10 trillion, the first time it hit double digits since June 2022. The median home value in Australia is $732,886.
There are many reasons for the size of the Australian housing market. One of the main reasons is that Australia has not been building enough homes to meet the demands of its rapidly growing population, creating a scarcity that makes any available home more expensive to buy or rent. Australia's restrictive planning laws also prevent homes from being built where most people want to live, such as in major cities. Additionally, the steady decline of public housing and ballooning waitlists, as well as the commercialisation of property ownership, have all contributed to the size of the market.
The large housing market in Australia has had a significant impact on the country's economy and society. On the one hand, the property sector is a major employer, with around 1.4 million full-time jobs directly linked to the sector in 2021-22 and an additional 1.75 million jobs indirectly supported. However, the high cost of housing has made it unaffordable for many Australians, particularly the younger generation and low-income earners. This has led to an increase in homelessness and overcrowded living conditions, as well as a strain on household finances due to high rental payments.
