Growth in Australian home values re-accelerated in January, defying predictions 2026 would be a softer year for the property market and fears of an imminent Reserve Bank rate rise.
The median dwelling price hit a fresh national record of $912,465, data firm Cotality revealed in its monthly home value index on Monday.
Home values grew 0.8 per cent in January, faster than the 0.6 per cent growth recorded in December.
The property market showed signs of slowing in the last couple of months of 2025, which turned out to be a bumper year for price growth on the back of three interest rate cuts.
But with the central bank increasingly looking likely to make a swift return to rate hikes, the re-acceleration in real estate is not expected to be long-lived, Cotality research director Tim Lawless said.
“Resilience is probably the keyword here, despite growing headwinds for the housing market,” he told AAP.
Rising expectations for borrowing costs, higher inflation and record-high unaffordability were dampening consumer sentiment, while banking regulator APRA’s efforts to clamp down on risky lending would also constrain credit growth.
“But there’s also just this undersupply that I think is the main reason we’re still seeing housing values rising despite all these other challenges,” Mr Lawless said.
“New building supply is still some way off, at least from any level of materiality.
“It’s good news that we’re seeing approvals picking up and a pick-up in commencements.
“But the missing piece of the puzzle here is completions. And it still looks like the building sector is facing pretty significant feasibility challenges to finish off this desperately needed housing supply.”
Growth was highest in the mid-tier markets, with median prices up two per cent for the month in Perth, 1.6 per cent in Brisbane and 1.2 per cent in Adelaide.
Values rose slightly in Sydney (0.2 per cent) and Melbourne (0.1 per cent) after both cities retreated in December.
Governments are both helping and hindering affordability.
The federal government on Saturday announced the first tranche of funding as part of its promise to build 100,000 new homes for first-home buyers.
Mostly made up of conditional loans for enabling infrastructure and grants for state-run home-building programs, the funding injection will help boost supply but will take time to flow through the pipeline.
However, demand-boosting policies were having a more immediate effect on making homes more expensive.
“The expanded deposit guarantee has added some fuel to the fire for demand at the lower price points,” Mr Lawless said.
While growth between cheaper properties and the higher end of the market was already diverging due to affordability constraints, the expansion of the Albanese government’s first-home buyer scheme in October widened the gulf.
In the December quarter, prices grew 3.6 per cent in houses under the cap – which varies across cities and regions – compared with 2.4 per cent for homes priced above, Cotality analysis shows.
One city where government policies have had more success is Canberra, and renters and home buyers are reaping the rewards.
“Canberra’s apartment sector has seen a pretty significant supply addition over the past decade and it’s still going,” Mr Lawless said.
“That’s really added a lot to the amount of rental stock and housing stock overall and you can see it in the pricing figures as well.”
Canberra is the only capital city where rental vacancy is above the decade average and has also experienced the lowest rental growth in the past year.
As well as encouraging mid-rise density and targeted upzonings around new light rail infrastructure, part of the ACT’s supply success comes down to the fact there is no local government layer in the territory, helping streamline approvals processes, Mr Lawless said.