June Market Update - Thomas French

June 2025 - Monthly Market Update

Australian dwelling values rose by 0.5% in May, lifting the national index 1.7% higher over the first five months of the year. All capital cities recorded monthly gains, led by Darwin with a 1.6% increase, while every other city saw at least a 0.4% rise.

This marks the fourth consecutive month of growth following a brief 0.4% decline over the three months to January 2025. Much of the recent momentum can be attributed to interest rate cuts and growing expectations of further reductions throughout the year. The most recent cut in May is expected to continue positively influencing housing values through June and beyond.

Auction activity responded quickly, with capital city clearance rates rising to 65.1% in the week following the May rate cut—the highest since July 2024.

While monthly growth continues, the annual pace of change has slowed. The national Home Value Index rose 3.3% over the past 12 months, marking the softest annual gain since August 2023. This moderation reflects weaker capital gains in the latter half of 2024, including a slight dip in values earlier this year. Only Melbourne and Canberra have recorded annual declines, highlighting the market’s overall resilience despite cost-of-living pressures and previous rate settings.

Capital city housing trends are becoming more aligned. The gap between the strongest and weakest annual changes in dwelling values has narrowed to 9.8 percentage points—the smallest spread since March 2021. This follows a period of significant diversity, the most varied since 2007.

Lower-priced segments continue to lead growth in most cities, although improved borrowing conditions following the rate cuts are now driving renewed interest in higher-value markets.

In regional areas, values are trending upward across all “Rest of State” regions. Regional South Australia stands out with a 5.8% gain in the first five months of 2025. In contrast, regional Tasmania remains flat, with just a 0.1% lift over the same period.

Rental Market Trends

Rental growth has slowed nationally, even with some seasonal strength earlier in the year. Monthly growth eased to 0.4% in May, down from three consecutive months of 0.6% rises. Annual growth is also slowing in most markets, with the exception of Darwin and Hobart, where rents continue to push higher.

Sydney and Melbourne—previously leading the rental surge—are now among the softer capital city rental markets. This shift is likely due to growing affordability constraints and a slowdown in net overseas migration, both of which are dampening rental demand despite persistently low vacancy rates.

Like other advanced economies, Australia has seen a tapering in net overseas migration following a period of catch-up post-COVID and a recent outflow of temporary visa holders. Given that most new arrivals rent first, this change has had a direct impact on rental demand.

Melbourne Snapshot

Melbourne recorded its fourth straight month of growth in May, supported by the lingering impact of the February rate cut. This recovery follows a 10-month downturn, although dwelling values remain around 4.5% (roughly $37,000) below their March 2022 peak.

With a median dwelling value of $791,300, Melbourne remains one of the more affordable capital cities, behind only Hobart and Darwin.

Buyer confidence is returning, with advertised stock levels now 4.5% lower than a year ago and 1.3% below the previous five-year average.

National Outlook

The Reserve Bank of Australia (RBA) is becoming increasingly confident that inflation is tracking toward its 2 - 3% target range. Core inflation is expected to sit around the middle of that range by mid-2025 and remain there until at least mid-2027. This inflation outlook is reinforcing expectations of further interest rate cuts throughout the year.

This monetary easing is likely to stimulate continued momentum in both prices and transaction volumes. With interest rates and housing activity closely linked, the improving economic conditions are creating a more supportive environment for buyers and sellers alike.

Labour markets are gradually loosening, with unemployment forecast to rise to 4.3% by the end of 2025. GDP growth is also expected to remain modest at 2.1% for the year, factors that support the case for a more accommodative cash rate moving forward.

Political stability following the recent federal election is adding to consumer confidence. A key election commitment - the expansion of the government-backed 5% deposit scheme - is due to roll out next year. However, we may see some buyers act sooner to get ahead of anticipated demand in 2025.

Even with improving conditions, some headwinds remain. Affordability continues to be a challenge, with the national dwelling value to income ratio at a record-high 8.0 at the end of 2024, and serviceability costs still elevated.

Lending restrictions are helping to keep price growth in check. Since 2023, borrowers with debt-to-income ratios above six have made up just 6% or less of new loans. Any increase in risky lending could trigger a regulatory response.

Finally, slower population growth, paired with a lack of substantial new housing supply, is expected to keep a lid on runaway growth.

Overall, housing values are expected to rise modestly in 2025, albeit at a more tempered pace than seen throughout 2024.

Want to know what this means for your suburb? If you’d like a suburb-specific report or property update, please don’t hesitate to get in touch. You can contact me directly, or follow the link below to book a free, no-obligation market appraisal of your property. (Please include “TF” as a reference next to your name.)

Thomas French Executive Sales Consultant 📞 0415 558 101 ✉️ thomas@mtre.com.au

👉 Free Property Appraisals | Mitchell Torre 

Disclaimer: All statistics and data referenced in this update are sourced from Cotality Australia. While every effort has been made to ensure the accuracy and reliability of the information presented, Mitchell Torre Real Estate accepts no responsibility for any loss or damage arising from the use of this information. Readers are advised to conduct their own research before making any property-related decisions.