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Falling interest rates are driving further increases in home values across Australia.
Home prices continued to climb higher in June, aided by easing interest rates, according to research from property analytics and insights companies PropTrack and Cotality.
According to Cotality’s Home Value Index, home values rose for a fifth consecutive month in June, as falling interest rates continued to drive house prices higher across almost every broad region of Australia.
Cotality noted that home values increased 0.6 per cent in June, matching a 0.6 per cent gain in May to raise the average dwelling value to $837,586.
Monthly gains were recorded across almost every broad region of Australia, with Hobart (edging down 0.2 per cent) the only capital city or rest-of-state region to see a month-on-month fall.
Except for regional Tasmania (where values dropped 0.4 per cent), every capital city and rest-of-state region recorded a rise in values through the quarter.
National home values for the June quarter rose by 1.4 per cent, Cotality added.
Similarly, the PropTrack Home Price Index for June also showed prices rising, up 0.4 per cent, marking a new record high.
Prices are now 4.6 per cent higher than a year ago, up $40,900 over the past year.
PropTrack research showed that capital city markets drove the gains, with prices up 0.4 per cent month on month.
While growth in the regions has been slower than the rebound across the capitals in 2025, regional markets remained resilient and are up more than 65 per cent over the past five years.
Why are home values climbing?
Interest rate cuts in February and May 2025 have benefited the broader market, including home prices, according to the researchers.
Cotality’s research director Tim Lawless said falling rates had been a catalyst behind the renewed growth.
“The first rate cut in February was a clear turning point for housing value trends. An additional cut in May, and growing certainty of more cuts later in the year have further fuelled positive housing sentiment, pushing values higher,” Lawless said.
However, despite house values increasing, Lawless noted that the size of gains was moderate compared to previous years.
“Although value rises have been broad-based, the pace of growth remains mild compared to mid-2023 when the quarterly rate of growth in national home values peaked at 3.3 per cent, and for that matter, positively tepid relative to the extreme 8.1 per cent quarterly peak growth recorded through the height of the pandemic,” Lawless said.
The housing rebound is also occurring against a backdrop of relatively low home sales. Housing turnover through the first half of the year, based on estimates of sales and total dwelling stock, tracked at an annualised pace of 4.9 per cent, slightly below the decade-average turnover of 5.1 per cent.
Sluggish supply is also contributing to rising home values. Advertised stock levels are low, tracking 5.8 per cent below the same time a year ago, according to Cotality.
Meanwhile, PropTrack senior economist Eleanor Creagh said: “Market momentum is building amid renewed buyer confidence and improved sentiment, buoyed by falling interest rates and expectations of another rate cut in July.
“However, the upturn remains measured as affordability constraints keep the pace of growth in check.”
Bank economists have also weighed in on drivers of house price growth. Commenting on the reason for rising home values, Westpac economist Jameson Coombs said: “Clearly, Reserve Bank of Australia (RBA) rate cuts and the expectation of more to come is boosting buyer demand in the residential housing market.”
Reflecting on the trend, Lucinda Jerogin, Commonwealth Bank of Australia’s (CBA) associate economist, echoed: “The improvement in housing market momentum since mid-February continues to be fuelled by the RBA’s rate cutting cycle. However, continued affordability constraints, normalising population growth and elevated household debt remain significant headwinds.”
Will prices keep rising?
Looking ahead, Jerogin expects house values to keep climbing.
“We continue to expect home prices to lift by around 4 per cent in 2025, supported by the RBA’s rate-cutting cycle. The balance of risks clearly sits to the upside given we now expect a swifter easing cycle,” she said.
She reiterated that CBA is forecasting two further 25-bp rate cuts this year, favouring a July and August cut, with the risk sitting with an additional rate cut in late 2025 or early 2026.
Similarly, Cotality’s Lawless expects dwelling prices to rise higher.
“Given the upside risk that housing values will accelerate further from here as interest rates reduce, the reality is we will likely see home values rise by more than this over the coming 12 months,” Lawless said.
“However, despite the prospect for lower interest rates, affordability constraints will likely temper the extent of a housing market upswing.”
[Related: Record-high house prices raise affordability fears]
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