Confidence in property market rising, but affordability still a challenge

Australia’s property market is showing signs of renewed confidence, even as affordability remains a key concern, according to a new whitepaper from InvestorKit.

The report, Australia's Housing Fundamentals Analysis & A Market Pressure Review on 8 Capital Cities & 25 Most Populated Regional Cities (FY25/26), analyses 25 key housing fundamentals across the country, which includes apartment and townhouse product.

It reveals a mixed but improving picture: while affordability remains weak, financial fundamentals and consumer sentiment are rebounding, helped by three interest rate cuts.

“Unlike doomsday commentators or those who claim everything is booming, we let the data do the talking, the good and the bad," said Arjun Paliwal, CEO and head of research at InvestorKit.

"Our market pressure scoring system provides a clear, evidence-based view for anyone wanting to understand what’s really going on."

Nationally, the median dwelling price rose 3.7% in the year to July 2024, reaching record highs in both capital cities and regional areas. Overall, 16 of the 25 housing fundamentals are rated strong or very strong, with particularly tight conditions in many rental markets.

Sales Market Pressure

Among the capital cities Brisbane is among one of the capital cities to continue to exhibit high market pressure, though the heat has eased over the past year. Melbourne is steadily recovering, particularly in the established areas. Sydney’s market pressure is overall balanced, but pressure is expected to rise further as interest rates ease.

Among the regional cities, QLD and WA cities continue to show the highest pressure; VIC, NSW and TAS regions are recovering gradually, with VIC leading the rebound.

Greater Sydney:

• Pressure in Greater Sydney's sales market is balanced.
• Median house price and days on market have both risen steadily over the last 12 months.
• Inventory has been stable over the last 12 months, and is now at a balanced level of around 3.0 months of stock.

Greater Melbourne:

• Pressure in Greater Melbourne's sales market is balanced.
• Median house price and days on market have been relatively flat over the last 12 months.
• Inventory has started declining since early 2025, and is now at a healthy level of around 2.6 months of stock.

Greater Brisbane:

• Pressure in Greater Brisbane's sales market is high.
• Median house price has grown relatively strongly, while days on market have been relatively stable over the last 12 months.
• Inventory has been relatively stable over the last 12 months, and is now at a healthy level of around 2.7 months of stock.

‍Rental Market Pressure

Rental market pressure across Australia is still high, with 25/33 cities rated high or very high.

Among the major capital cities, Sydney and Melbourne have seen rental pressure moderate to more balanced levels, while Brisbane, plus Adelaide and Perth, continue to face tight rental conditions, especially Brisbane, where vacancy rates have declined over the past year.

In the regions, the QLD and WA cities continue to exhibit high rental pressure; In the meantime, most regional NSW and VIC cities' rental markets are tightening.

Greater Sydney:

• Pressure in Greater Sydney's rental market is balanced.
• Vacancy rate sits at a relatively low level of 1.2%.
• Median rent has stopped increasing since mid-2024, and is now only 2.7% higher than it was 12 months ago.
• Investors can expect a low rental yield of 3.0%.
• Rents have increased by 50% over the decade, which is in line with the Capital city average.

Greater Melbourne:

• Pressure in Greater Melbourne's rental market is balanced.
• Vacancy rate sits at a relatively low level of 1.5%.
• Rental growth has slowed since late 2024, rising by 5.5% over the last 12 months.
• Investors can expect a relatively low rental yield of 3.8%.
• Rents have increased by 53% over the decade, slightly above the Capital city average.

Greater Brisbane:

• Pressure in Greater Brisbane's rental market is high.
• Vacancy rate sits at a low level of 0.8%. Median rent increased by 6.7% over the last 12 months.
• Investors can expect a relatively low rental yield of 3.8%.
• Rents have increased by 60% over the decade, well above the Capital city average.

“While affordability remains a hurdle for many, strong rental markets and improving consumer confidence are creating pockets of opportunity, particularly for those willing to look beyond the traditional hotspots," Paliwal said.

"Whether it’s the capitals or high-performing regional centres, the key is cutting through the noise and following the data.

"For investors who do, the potential rewards are significant."

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