Supply-side issues and increased borrowing capacity have led to the strongest monthly increase in national dwelling values seen since October 2023.
Australia’s housing market looks set for a competitive spring, with new research from property insights firm Cotality revealing a notable rise in national dwelling values, driven partly by supply constraints and increased borrowing capacity.
In September 2025, the Cotality Home Value Index (HVI), a national index that tracks the monthly change in property values, rose by 0.8 per cent.
This represented the strongest monthly increase since October 2023.
On a quarterly basis, the HVI rose 2.2 per cent, equivalent to an $18,215 increase in median dwelling value. This outpaced the June quarter gain of 1.5 per cent and was double the 1.1 per cent rise recorded in the three months to March 2025.
Every capital and rest-of-state region posted an increase in dwelling values over monthly, quarterly, and 12-month measures; however, Cotality noted some divergences in pace.
For instance, Perth and Brisbane both outpaced the quarterly value growth seen in larger capitals with gains of 4.0 per cent and 3.5 per cent, respectively.
Darwin saw even stronger growth, with dwelling values up 5.9 per cent.
By comparison, dwelling value growth in Sydney and Melbourne was more modest during the September quarter at 2.1 per cent and 1.0 per cent.
Cotality also reported a quarterly increase in dwelling values across all segments, with lower-quartile homes up 2.6 per cent, middle-market dwellings rising 2.7 per cent, and upper-quartile properties climbing 1.8 per cent.
Supply squeeze
One factor that has driven the increase in values is an absence of supply, and Cotality noted advertised stock levels were below average across every capital city.
During the September quarter, the number of listings was around 18 per cent below the five-year average, according to Cotality, while sales estimates were 7.3 per cent higher.
Cotality’s research director, Tim Lawless, also noted the absence of supply in the cities that saw the strongest value growth.
“The number of homes for sale at the end of September was about 53 per cent lower than average in Darwin, 45 per cent below average in Perth and down 31 per cent in Brisbane,” he said.
“At the same time, estimates for quarterly home sales are tracking above average, demonstrating a clear disconnect between demand and supply.”
Lower interest rates, rising real income growth, and a gradual rise in sentiment are also likely to see prices lift through spring and to the end of the year, according to Lawless.
“The seventy-five basis point cut to the cash rate has played a key role in supporting housing activity,” Lawless added.
“Borrowing capacity (based on the median household income of $106,000) has increased by around 7.0 per cent since the first rate cut in February, and lower interest rates have supported a lift in consumer sentiment, which is important for high-commitment decision-making.”
Hot property
Part of what makes this dataset so interesting is its timing – capturing the period immediately prior to the launch of the government’s expanded First Home Guarantee Scheme.
Launched today (1 October), the expanded scheme enables eligible first home buyers to access a loan with a 5 per cent deposit without paying lenders mortgage insurance (LMI).
Cotality said the scheme is likely to prove popular with prospective first home buyers, leading to higher levels of demand concentrated around its new price caps.
However, it won’t be the only factor weighing on values in the near term.
Speaking to The Adviser, Eliza Owen, Cotality’s head of research, said that while there may be a short-term boost from the expansion of the scheme at the lower end of the market, long-term factors, such as interest rates and housing supply, are likely to have a greater impact on prices.
“It’s hard to say because there’s a bit of a tension between government and participating lenders trying to boost home ownership, while the regulatory framework around lending is very low risk. This means people could qualify for the scheme, but not the mortgage,” she said.
“In June this year, the Westpac economics team estimated the number of people eligible for the expanded scheme was quite high, at around 400,000 nationally. But this is only qualifying for the scheme, not a home loan, and other barriers like stamp duty and bank serviceability assessment will whittle down the number of people who can actually use it.”
Owen also noted the impact of interest rates on the market, not just in terms of borrowing capacity, but also consumer sentiment and confidence.
“Following three interest rate reductions, a gradual lift in consumer sentiment and rising real incomes, there’s essentially more demand ramping up home values as we move through spring,” she said.
“Supply-side factors are also extremely important, like rates of construction and the volume of listings. Currently listings volumes nationally are about 20 per cent below historic averages, adding to price pressures.”
The Reserve Bank of Australia (RBA) decided to leave the cash rate at 3.60 per cent at its September 2025 meeting, as reported by The Adviser.
[Related: More rate cuts would exacerbate house prices: Cotality]
