Dwelling values Down Under rose by another 0.5%, taking the national Home Value Index (HVI) 1.7% higher over the first five months of the year, off the back of two rate cuts delivered and more tipped to occur.
"The continued momentum we're seeing across almost all markets is no doubt being fuelled by rate cuts - both those that have already happened and the potential cuts in the coming months," said Tim Lawless, Cotality's research director.
As at 31 May, the median value of residential properties nationally stood at $831,288 - a new record - and is expected to rise further in the next months.
"With interest rates falling again in May, we are likely to see a further positive influence flowing through to housing values in June and through the rest of the year," Mr Lawless said.
Some renewed confidence after the federal election and an ongoing undersupply of newly built homes are other factors likely to support further price growth, according to Cotality.
A pillar of the Labor Party's election platform was a first home buyer initiative providing access to homeownership.
"While the expanded 5% deposit guarantee doesn't go live until next year, we could see financially capable first home buyers looking to beat the rush in 2025," Mr Lawless said.
In annual terms, however, the national HVI slowed to 3.3%, the slowest 12-month change since the year ending August 2023.
Mr Lawless attributed the lag in the annual growth to the noted easing in the second half of last year, which culminated in a decline over the three months to January 2025.
Affordability pressures, which are expected to constrain housing demand, are expected to keep any material upswing in housing values in check.
Gap between the top and worst performers narrows
The gains posted in May were broad-based, with every capital city rising by at least 0.4% through the month; overall, the growth was at 0.5%.
However, beyond the price increases, Cotality's latest HVI shows growth trends converging across the capital cities, with the gap between the highest and lowest annual change in dwelling values at 9.8 percentage points, the narrowest since March 2021.
In comparison, the widest gap recorded in August 2023 was a 26.1 ppt difference between the highest (Perth at 24.5%) and the lowest (Hobart at -1.6%) annual growth rates.
According to the property analytics firm, the convergence is driven by a slowdown in value growth across previously top-performing mid-sized capitals (Perth and Adelaide), while previously softer markets like Melbourne and the ACT return to growth.
Lower-priced homes, regional markets drive growth
Homes in lower price tiers continue to lead the rise in dwelling values across most cities, except in Sydney and Canberra, where the upper quartile has demonstrated stronger quarterly growth.
"However, there has been some convergence here as well, as more expensive market segments start to accelerate off the back of rate cuts," the report stated.
Regional markets maintained their strong performance in May, with each of the "rest of state" regions recording a rise in values year-to-date.
The strongest gains have been in Regional South Australia, where values are up 5.8% over the first five months of 2025.
While growth in dwelling values in combined regionals was slower this month compared to the capitals - 0.4% vs 0.5% - regional markets continue to outpace the capital cities and national average in quarterly and annual terms.
The median dwelling price in regional areas is currently around $679k, while it's $912k in combined capitals.
Rental growth slows despite low vacancy rates
The latest HVI also revealed the monthly pace of rental growth eased back to 0.4% in May, following three months of 0.6% month-on-month gains.
On an annual basis, the majority of cities are showing a clear slowdown in growth, with the exceptions of Darwin and Hobart, where rental growth has accelerated.
Sydney and Melbourne are now among the softest rental markets in the country following a period of extreme rental growth.
Interestingly, this slowdown in the pace of rental growth is unfolding despite vacancy rates still stuck below 2% in every capital city.
Cotality explained that the trend is driven by affordability constraints and normalising net overseas migration.
"Even if there are a few vacant properties available for rent, it's hard to see how rental values can continue to record a strong rise off already high prices, especially with wage growth now slowing," the report read.
As a result, larger households, such as share houses and multigenerational homes, are becoming more popular, thereby taking some pressure off demand.
Image by Jesse Hammer on Unsplash
