The Australian property market in 2025 isn't behaving the way many expected. Here's what matters:
Perth is leading the nation with the strongest property market growth, outperforming Sydney and Melbourne
The RBA has cut rates three times in 2025 (February, May, August), bringing the cash rate to 3.60%
National property prices are up 6.1% annually and 1.1% monthly, but experts warn against expecting a boom
A housing supply shortage continues to drive prices higher—dwelling approvals are at only two-thirds of the national target
November's surprise inflation rebound to 3.2% has paused further rate cuts, creating uncertainty for buyers
Regional markets (Perth, Adelaide, Brisbane) are outperforming major capitals due to affordability and lifestyle migration
Economists predict modest growth rather than a market boom, even with rate relief
The Australian property market in 2025 is a bit like watching a horse race where the outsider suddenly takes the lead. While everyone's been watching Sydney and Melbourne, Perth has quietly surged to the front of the pack.
And it's not just Perth making headlines. The Reserve Bank of Australia's three interest rate cuts have created a strange paradox: rates are falling, yet experts aren't predicting a boom. Understanding why requires looking beyond the headlines.
Three rate cuts in a single year sounds like cause for celebration, right? Not quite.
The RBA reduced the cash rate from 4.35% to 3.60% through cuts in February, May, and August 2025. That's real relief for mortgage holders—roughly $200-$300 less per month on a typical $600,000 loan. But here's the catch: November brought a surprise inflation rebound to 3.2%, with the RBA forecasting a potential rise to 3.7% by mid-2026.
Think of it like turning down the heat on a pot that's still simmering. The water cools a bit, but it hasn't stopped bubbling.
The November rate hold caught many off guard. Buyers who'd been banking on another cut before Christmas now face a wait-and-see scenario heading into 2026. This creates an interesting tension in the market—those who acted earlier in the year may have timed it right, while those who hesitated hoping for even lower rates find themselves in a more uncertain position.
If the Australian property market were a report card, Perth would be the student who went from middle of the class to top of the year.
Perth's property market is booming for reasons that have little to do with rate cuts and everything to do with fundamentals. The city is experiencing a perfect storm of positive factors: strong interstate migration (people escaping higher costs in Sydney and Melbourne), limited housing supply, and robust economic conditions driven by the resources sector.
While Sydney's median dwelling price sits at a stratospheric $1.14 million and Melbourne hovers around $765,000, Perth offers comparative affordability with growth momentum. Buyers are getting more house for their money, and investors are eyeing capital growth potential that the eastern capitals have already exhausted in previous cycles.
Here's what's driving Perth's outperformance:
Dwelling approvals across Australia are at only two-thirds of the national target. In Perth, this shortage is even more pronounced. When demand outstrips supply—as any economics student knows—prices rise. Simple as that.
Australians are voting with their feet. The lifestyle-to-cost ratio in Perth has never looked better compared to Sydney or Melbourne. Remote work arrangements post-pandemic have made this shift easier, and many buyers find they can purchase a family home in Perth for what would barely buy an apartment in Sydney's middle ring.
Western Australia's economy, buoyed by mining and resources, provides employment security and wage growth. When people feel confident about their jobs, they buy property. Perth's boom isn't speculation—it's backed by genuine economic strength.
Perth isn't alone in its outperformance. Adelaide and Brisbane are also showing stronger growth than Sydney and Melbourne, creating a regional renaissance in Australian property.
This shift reflects a broader trend: buyers are prioritizing affordability and lifestyle over the prestige of living in the biggest cities. The pandemic proved that many jobs don't require a daily commute to a CBD office tower. That realization has fundamentally changed how Australians think about where to live.
Brisbane combines growth with infrastructure investment—the 2032 Olympics are driving development and confidence. Adelaide offers a similar value proposition to Perth: affordability, lifestyle, and steady economic fundamentals without the volatility of larger markets.
Here's an uncomfortable truth: even with rate cuts providing some relief on borrowing costs, Australia isn't building enough homes to meet demand.
National dwelling approvals are running at two-thirds of what's needed. That's not a small gap—it's a structural problem that will take years to resolve. Governments at all levels are talking about boosting supply, but talking and building are two different things.
For buyers, this means:
The supply shortage acts like a floor under property prices. Even if demand softens slightly, limited supply prevents significant price falls. It's like trying to push down on a balloon—there's only so much give before resistance takes over.
For investors and first home buyers alike, this supply constraint is a critical factor in timing decisions. Waiting for a major price correction may mean waiting a very long time—or indefinitely—in markets where supply simply can't keep pace.
Despite three rate cuts and strong regional performance, economists aren't predicting a property boom. Why the caution?
Property markets respond to multiple variables: employment, consumer confidence, wage growth, lending standards, and regulatory settings all play roles. Rate cuts help, but they don't override weak fundamentals elsewhere.
Banks aren't throwing money around the way they once did. Borrowers still face rigorous serviceability assessments, and lenders are cautious about over-leveraging. A 100 basis point cut in the cash rate doesn't automatically translate to dramatically higher borrowing capacity if other lending criteria remain conservative.
Even with rate relief, property prices in Australia's major markets remain at historic highs relative to incomes. The median dwelling price nationally sits at $848,858. For many buyers, that's still a stretch—rate cuts or not.
The November inflation rebound to 3.2% reminded everyone that the path to lower rates isn't necessarily smooth. If inflation proves sticky, the RBA may hold rates steady for longer, limiting the boost to buyer sentiment.
So where does all this leave someone actually trying to make a decision about property in late 2025?
The expanded First Home Guarantee Scheme (unlimited places as of October 2025) is a genuine opportunity. Combine that with regional market affordability—particularly in Perth—and first home buyers have a better entry point than they've had in years. Waiting for rates to fall further carries risk if Perth's supply-constrained market continues pushing prices up.
Those looking to upgrade or relocate face an interesting calculus. Rate cuts have improved borrowing capacity, but competition remains strong in desirable areas. The key is being strategic about timing and location—moving from a high-priced market to a growth market like Perth can unlock significant value.
Perth and regional markets offer growth potential that Sydney and Melbourne may not match in the current cycle. However, investors need to look beyond price growth alone—rental yields, vacancy rates, and long-term economic fundamentals should drive decisions, not just headlines about rate cuts.
With nearly 30% more Australians refinancing year-on-year in early 2025, many homeowners are already acting on rate opportunities. Those still sitting on older, higher-rate loans are leaving money on the table—potentially thousands per year.
The crystal ball remains cloudy for 2026. Will the RBA cut rates again? Will Perth's boom continue? Will supply shortages ease?
What's clear is that Australia's property market isn't following a simple script. Regional outperformance, supply constraints, and inflation uncertainty create a complex environment. Fast decisions aren't always smart decisions, but paralysis by analysis carries its own risks when supply-constrained markets like Perth keep pushing higher.
The goal isn't to time the market perfectly—it's to make informed decisions aligned with personal circumstances and long-term strategy.
At Mountway Finance, the focus isn't on predicting boom or bust—it's on understanding what's happening in the market right now and how that intersects with individual goals and circumstances.
Every buyer's situation is different. Someone purchasing their first home in Perth faces different considerations than an investor refinancing a Sydney property or a business owner looking to leverage equity. Cookie-cutter advice doesn't cut it in a market this nuanced.
The right approach combines market knowledge with personal strategy: borrowing capacity, loan structure, timing, and long-term objectives all matter more than chasing headlines about rate cuts.
Ready to talk through your property financing strategy in a market that's anything but straightforward? The Mountway team brings straight talk and strategic thinking to every conversation—no fluff, just facts. Book a chat today.