Australia’s housing affordability crisis is showing no signs of abating as the median house price in four capital cities lifts to more than $1 million for the first time.
Cotality figures from January show a 0.8 per cent lift in house values across the country, driven by a sharp drop in the volume of properties for sale and an increase in the number of people entering the property market to escape high rents.
The 0.8 per cent rise – which followed a 0.6 per cent increase nationally in December – pushed Perth into the $1 million club, where it joins Sydney, Brisbane and Canberra.
After dipping in December, house values in our two biggest cities went up last month: Sydney by 0.3 per cent and Melbourne by 0.2 per cent. Sydney’s median house value is now almost $1.6 million and in Melbourne the figure is $989,356.
The figures come ahead of the Reserve Bank’s monetary policy committee meeting that starts on Monday. Financial markets put the chance of a rate rise on Tuesday at 70 per cent.
Values in Melbourne and Sydney are growing much more slowly than in smaller capitals. Perth’s median house value rose by another 1.9 per cent in December, taking it beyond the $1 million mark. Over the past year, Perth’s median house value has climbed by 18.4 per cent.
It’s a similar story in Brisbane, where the median house value reached a record $1.15 million in January, a 15.1 per cent increase over the past 12 months.
Adelaide’s median value lifted by 1.3 per cent to an all-time high of $972,435. In Canberra, the median value moved up by 0.5 per cent to $1.03 million.
A key factor is a shortage of homes on the market. Cotality estimates the number of homes advertised for sale is 19 per cent down on the same period last month.
Cotality research director Tim Lawless said while values were climbing, momentum for further increases would ebb due to the prospect of higher interest rates and the unaffordability of many homes.
“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.”
Housing affordability continues to plague the Albanese government despite efforts to lift the number of homes being built across the country. At the weekend, Prime Minister Anthony Albanese announced a $668 million housing package that included $300 million in water infrastructure to support 4000 new homes in Adelaide’s northern suburbs.
That was after Treasurer Jim Chalmers told economics Nobel Prize winner Joseph Stiglitz in an interview for The Monthly magazine that the cost of housing was a “defining part” of the intergenerational challenge facing the country.
Cotality reported that there had been a slight increase in the national rental vacancy rate, which rose marginally to 1.7 per cent last month.
Lawless said every capital city except Canberra had a vacancy rate below long-term averages. Rents have climbed nationally by more than 42 per cent over the past five years.
Those sharp rent increases have led many renters to try to buy a home, putting pressure on the overall market but particularly at the lower price end.
Lawless said values for the bottom quarter of the market had lifted by 1.3 per cent in January compared to 0.3 per cent for the top quarter.
“This is where first home buyers, investors and, progressively, mainstream demand is most concentrated,” he said.
In Melbourne, unit values eased by 0.2 per cent in January to be up by 2.7 per cent over the past year to $639,145. Canberra’s median unit value has lifted by just 0.4 per cent since January last year to $592,009.
The median value of units in Perth has jumped by 20.1 per cent over the past year to $699,814. In Brisbane, it has jumped by 18.3 per cent to $824,764.
AMP chief economist Shane Oliver said the question of an interest rate rise on Tuesday was more like a 50-50 chance, given the strength of the Australian dollar and evidence in recent inflation data that underlying price pressures were starting to ease.
“If there is a 0.25 percentage point hike, we would see it as a case of being one and done,” he said.
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Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.
