What’s driving Australia’s property market in July 2025?
Strong price growth, tight rental supply, and attractive yields in emerging and top-performing cities are driving solid returns for investors across the country.
Top-performing cities such as Darwin have delivered total annualised returns of up to 26.5%
Double Digit Price Growth in Emerging Cities and Tight Rental Yields across the Country
The national housing market has demonstrated a clear upward trajectory, with positive price growth recorded across all capital cities over the past three months. According to Cotality’s July 2025 Home Value Index, national dwelling values rose by 1.4% over the June quarter—equivalent to an annualised growth rate of approximately 5.6%.
This growth has been driven by consistent population growth at approximately 450,000 in the past 12 months, below average housing supply, and affordable price points in Darwin, Brisbane, Adelaide and Perth relative to Sydney and Melbourne.
Rental market conditions remain exceptionally tight, with vacancy rates at historically low levels at 0.6% in Hobart, 0.7% in Perth and Darwin, 0.8% in Adelaide, and 1.0% in Brisbane.
While rental yields have moderated slightly over the past year, our recommended markets continue to generate strong returns for investors—yielding approximately 6% in Darwin and around 4% in Adelaide, Perth, and Brisbane.
When considering both annualised capital growth and rental yield, top-performing markets such as Darwin have delivered total returns of up to 26.5% — comprising 20% annualised price growth (4.9% quarterly growth and a 6.5% rental yield (Cotality, formerly CoreLogic – Monthly Housing Chart Pack, July 2025).
Change in Dwelling Values
Source: Cotality
Interest Rates
The Reserve Bank of Australia (RBA) decided to keep the cash rate on hold at 3.85% in its July 2025 Board meeting. This move surprised the market and home loan holders who had widely anticipated a 0.25% cut, as both headline and trimmed mean inflation rates were moderating within the RBA’s 2-3% target band and the unemployment rate had marginally increased from 4% to 4.1%.
The RBA indicated it would wait for more official quarterly inflation data, due to be released by 30th July 2025. They also monitor the impact of the 3.5% minimum wage increase from July 1, 2025, on inflation, as well as new developments in the global economy, especially the U.S tariffs.
Despite this pause, the current cash rate is 0.5% lower than four months ago, following cuts in February and May this year. Most lenders have fully passed these cuts on to customers, injecting optimism into the property market and broader economy.
Looking ahead, the current cash rate of 3.85% is significantly higher than the estimated long-term neutral cash rate of 3%. This suggests there’s ample room for further cuts during the remainder of 2025.
Cash Rate Target
Unit/Townhouse and House Price Growth Divergence
A key shift in market dynamics over the past year has been the outperformance of unit and townhouse price growth relative to detached houses across most capital cities. This trend is largely driven by affordability constraints, driving more buyers to toward higher-density and lower-cost housing alternatives.
As a result, the price gap between houses and units has widened to record levels. As of June 2025, detached houses are trading at significant premiums over units: 85% in Sydney, 76% in Brisbane, 64% in Perth, and 62% in Melbourne. Even in smaller capital cities, the differentials remain substantial—56% in Canberra, 53% in Darwin, 42% in Adelaide, and 24% in Hobart.
Our analysis indicates that unit and townhouse prices are likely to continue outperforming detached houses in the short to medium term. Demand for affordable, well-located housing in metropolitan areas remains strong. As our cities expand and commute times lengthen, households—particularly working families—are placing greater value on proximity to employment, public transport, and lifestyle amenities over traditional suburban dwellings.
Outlook and Strategy
The property market fundamentals remain strong, with a high population increase of approximately 450,000 in 2025, and the ongoing housing shortage and tight vacancy rates below 1% in many major metropolitan areas. The imbalance between demand and supply is forecasted to underpin further upward pressure on property values in 2025–26.
Looking ahead, investment strategies should concentrate on high-growth markets such as Darwin, Brisbane, Perth, and Adelaide. These cities offer a mix of capital growth potential, strong rental yields, and relative affordability.
For example, a $1 million investment in growth cities yielding 5% annually delivers $20,000 more income compared to a 3% yield in stagnant cities—plus about a 5% ~ $50,000 difference in capital growth per year. This additional income and equity enhance investor cash flow and improves borrowing capacity, supporting long-term portfolio expansion.