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From 76k to 880k: The rise of Australian home values
Investors who entered the Australian property market decades ago have reaped strong long-term growth, as the market trended upward over the last 40 years despite occasional dips and economic shocks.
Australians have long been obsessed with property, tracking market ups and downs, debating where to buy, and envying those who got in early – and with good reason.
A recent Cotality report found that over the past 40 years, property values have risen by 937.9 per cent nationally, from a median of around $76,000 in 1986 to a record high of $880,000 in December 2025.
While 2025 saw growth driven by rate cuts and government stimulus, Cotality research director Tim Lawless said that over the decades, Australia’s housing market has consistently proven resilient, even under tougher conditions.
“Sometimes home values surge when you least expect it,” Lawless said.
“In 1988, with interest rates nearing 15 per cent and rising, Australian home values skyrocketed by 31 per cent.”
“Fast forward to 2021, amid a global pandemic and closed borders, national values jumped almost 25 per cent.”
Lawless said that real estate markets were driven by factors beyond interest rates, with fiscal policy, credit availability, demand-side pressures, and shock events also significantly affecting property values.
“These standout years remind us that housing markets are influenced by more than just interest rates.”
“Fiscal stimulus, credit availability, migration trends and economic shocks all play a role in shaping outcomes.”
Top capital cities that soared over the decades
While dwelling prices have increased across the country, Lawless said the market had undergone several cycles over the past 40 years, reacting differently to the various economic factors.
Sydney led the capital cities in value growth over the past 40 years, with the Outer West and Blue Mountains region rising by 1,592.4 per cent, equating to a compounded rate of approximately 7.3 per year.
Lawless said the intense growth in the greater Sydney region was driven by a low base and high levels of new development in the city’s outer west, while scarcity and connectivity have pushed demand in the eastern suburbs.
“It’s kind of like chalk and cheese when you look at those two areas, but they’ve got their own growth drivers.”
Brisbane experienced the second-largest growth rate, with property values in the city’s eastern suburbs increasing by 1,267.7 per cent.
He said that while Brisbane may have outperformed several other cities in value growth, much of it had occurred in the past decade.
Despite differing value growth trends observed at the macro level, Lawless said that over an extended period, growth rates were fairly similar.
“I’d say that the cyclicality tends to wash out over a 40-year time period, so you wouldn’t find much difference between Sydney and Brisbane overall.”
Lawless noted that Melbourne was telling a different story, with its north-west rising just 628.6 per cent over 40 years, well below the national average.
He said much of Melbourne’s slower growth was due to the city’s stronger response in increasing housing supply.
“Dwellings completion data shows about 885,000 homes were built across Victoria over the 15 years ending June 2025, 21.5 per cent more than NSW despite a similar rate of population growth.”
“This healthier response has helped to keep a lid on price growth, especially across outer Melbourne, where greenfield housing has been more prolific, and inner Melbourne, which has densified.”
The rare downturns
While property values have climbed sharply over the past four decades, data showed that the market has also faced occasional slowdowns and brief downturns.
According to Cotality, over the past 40 years, there have been only six periods in which values fell: 1990, 1995, 2008, 2011, 2018, and 2022.
In each of these periods of declining values, Lawless said there was limited data showing consistent factors that had driven the decline.
“The last time property values fell, in 2022, that was all about interest rates rising off their emergency lows.”
“We saw one of the most rapid rate hiking cycles in history after a period of extreme growth.”
“So off a really high base, the market went through a short and sharp correction, then started rising again in 2023.”
Lawless said that a drop in stimulus and rising interest rates, along with shock events such as the global financial crisis (GFC), had also caused the other declines seen in the 2000’s.
Capital cities to slow in 2026
While Lawless said the market is unlikely to experience a full-scale downturn in 2026, he anticipated more subdued growth in dwelling values overall.
“I think the market is going to see some dampening pressures simply because interest rates are likely to be on hold.”
“We don’t have the same stimulus as what we saw through 2025 with a 75 basis point rate cut.”
He stressed that the pressure of stretched affordability and serviceability, as well as a dent to investor confidence, would continue to weigh on consumer sentiment.
Conversely, Lawless said the ongoing undersupply of housing would keep a floor under prices and deliver a modest level of growth, rather than what was seen in 2025.
“I wonder if Sydney might be a market that does move through a period of relatively soft growth conditions, giving affordability some time to catch up,” Lawless said.
Lawless said that Australia’s second-largest city, Melbourne, had developed a significant affordability advantage over Sydney over the past five years, and could be set to grow in 2026.
“Though it is not very popular with investors at the moment, we may start to see investor appetite picking up, taking advantage of the low buy-in price and opportunities for medium to long-term capital gains.”
With investment into Brisbane surging in recent years, Lawless said that he expects the river city to slow in 2026, as buyers begin to be priced out.
“Brisbane has the Olympics in 2032 and a huge amount of infrastructure development that is currently underway.”
“So the significant public capital investments, along with strong population growth, will help to support housing demand in the market and continue to see prices rise, but it is becoming an increasingly unaffordable market as well.”
Lawless predicted that Adelaide’s rapid growth over the last five years will also falter, as it lacks the fundamentals that, in Brisbane, continue to support ongoing price rises.
He said that negative migration, supply issues, and affordability concerns will likely affect the market in 2026, with dwelling values exceeding 9 times household incomes.
“Even though it has a lower median than Brisbane, when you adjust for local incomes, it shows that housing affordability is very stretched.”
“If we start to see a supply response in South Australia, and we have seen dwelling approvals rise, that could be a signal that Adelaide is moving to a more sustainable rate of growth,” Lawless concluded.