Cotality's latest Home Value Index (HVI) revealed residential property values Down Under rose by another 1% in November, marking the third straight month of 1% gains.
The pace did slow slightly from October's 1.1% rise, but momentum remains firmly positive.
Dragging the headline growth figure was Australia's two largest cities Sydney and Melbourne, whose values rose at a modest pace - 0.5% and 0.3%, respectively.
In contrast, mid-sized capitals again outperformed, surging past 1%.
"The skew towards the mid-sized capitals is especially evident in Perth," Cotality research director Tim Lawless noted.
"[In Perth] listings are holding more than 40% below average, buyer demand is elevated, and the 2.4% monthly rise in dwelling values has added just over $21,000 to the median in November."
What investors are seeing in Sydney
While Sydney's home values rose a modest 0.5% in November and listings sit only 2.2% below the five-year average, investors appear unfazed by softer monthly gains, stretched affordability or higher borrowing costs.
Despite recording the lowest gross rental yields in the country at just 3%, Sydney continues to attract more investors.
Investment lending in NSW comprised 46.2% of mortgage demand by value, the highest share since the second quarter of 2017, according to Cotality.
Mr Lawless said the surge underscores what really drives Australia's investors: expectations of long-term capital growth, not cash flow.
"Such a high level of participation from investors across the state where opportunities for positive cash flow are the lowest is a stark reminder about what motivates Australian investors," he said.
"An expectation that prices will rise over the medium to long term is the key factor in most housing investment decisions."
Australia's housing dynamics are 'becoming more complex'
Cotality noted that the housing market is now being pulled in opposing directions.
Downside risks include stretched affordability, interest rates being held for an extended period of time, renewed cost-of-living pressures, and the recently announced limits on high debt-to-income lending.
On the other hand, low supply and demand-side policies, i.e., the expanded 5% deposit guarantee and the upcoming Help to Buy shared equity program, are expected to prop up prices.
"What's clear is the upside factors are outweighing the downside risks, and it's hard to see this dynamic moving into reverse any time soon," Mr Lawless said.
"Time will tell whether this month's slowdown in growth is a reflection of headwinds starting to curtail housing tailwinds."
Overall, he expects home values to keep rising through 2026, though at a slower pace as affordability and borrowing capacity place a ceiling on price growth.
Will APRA's high DTI cap affect investors?
According to the Cotality, the recently announced 20% limit on high debt-to-income ratio lending "isn't likely to play a significant role" in slowing home value growth.
However, it notes, a "more overt policy adjustment", e.g., a lower limit on high DTI lending or a renewed investor credit growth speed limit, if implemented, would have a more substantial impact.
"Especially at a time when investors comprise around 41% of home lending," Mr Lawless said.
Image by Jhon Jim on Unsplash
