General Market Overview

The Australian Bureau of Statistics (ABS) recorded a 1.3% rise in the Consumer Price Index (CPI) for the September 2025 quarter, bringing annual inflation to 3.2%—the highest rate since June 2024. Quarterly CPI movements from Q2 2024 to Q1 2025 were 0.2%, 0.9%, 0.7%, and 1.3%, pointing to mounting upward pressure on prices. Despite some short-term variability, annual inflation shows a cautious upward trend. Between September 2024 and September 2025, yearly inflation measured 2.4%, 2.4%, 2.1%, and 3.2%, indicating a gradual increase over the period. Headline inflation from Q1 2024 to Q1 2025—3.6%, 3.8%, 2.8%, 2.4%, and 2.4%—also demonstrates a persistently elevated inflation environment. The latest quarterly increase was driven largely by higher costs in Housing (+2.5%), Recreation and Culture (+1.9%), Alcohol and Tobacco (+1.6%), and Transport (+1.2%). Taken together, these developments reinforce the need for the Reserve Bank of Australia (RBA) to remain cautious in its approach to inflation and continue steering outcomes toward its 2–3% target range.

As of March 2025, Australia’s population climbed to 27.53 million, marking an annual increase of 423,400 people, representing a growth rate of 1.6%. This expansion was driven largely by net overseas migration (NOM), which contributed 315,900 people, complemented by a natural increase of 107,400.

Population dynamics vary significantly across states and territories. New South Wales, Victoria, and Queensland remain the most populous, with NSW at 8.58 million, Victoria at 7.05 million, and Queensland at 5.65 million. Growth in these states is concentrated in major urban centres: Melbourne and Brisbane each recorded a 2.7% increase in 2024, underscoring the ongoing urbanisation trend. This surge is expected to fuel demand for residential and commercial property, stimulating credit activity, particularly in real estate financing and infrastructure development.

Meanwhile, regional areas are experiencing robust growth, propelled by decentralisation as more Australians seek affordable housing outside capital cities. This shift opens new opportunities for private credit markets, but also introduces challenges. Lenders will need to navigate diverse local economic conditions, tailoring financing solutions to regional needs while managing heightened risk exposure in less-established markets.

As of October 2025, Australia’s labour market remained resilient, with unemployment steady at 4.4% and total employment reaching 14.67 million. The employment-to-population ratio eased slightly to 64%, while participation held firm at 67%. Underemployment decreased to 5.7%, and monthly hours worked steadily decreased to 1.97 billion, indicating a potential seasonal decrease in labour demand.

New South Wales recorded an unemployment rate of 4.3%, slightly below the national average. Victoria and Queensland also maintained solid momentum, with Queensland supported by strong demand in construction and services. Nationally, full-time employment increased by 55,300, and part-time roles rose by 13,100 over the quarter.

In trend terms, employment grew by 35,400 over the past quarter, led by major urban centres such as Sydney, Melbourne, and Brisbane. Continued migration is intensifying demand for housing and infrastructure, influencing real estate and private credit markets, particularly mortgage lending. However, the rise in part-time roles suggests some households still face challenges securing full-time work, weighing on cash flow in certain sectors.

Building approval trends were generally favourable for the year leading up to November 2025. Total dwelling approvals rose to 17,019, representing a 12.0% month-over-month increase and a 15.3% year-over-year increase. Private sector house approvals rose 4.0% to 9,547, and private sector dwellings experienced a sharp increase of 26.0% to 7,219. This aligned with a broader trend of strengthening residential building values, which rose 7.4% to $10.11 billion. In contrast, the total value of non-residential buildings fell 19.3% to $6.39 billion. At the state level, the landscape was mixed. Total dwelling approvals increased in Australia’s southeast, with Victoria rising by 41.3%, New South Wales rising by 30.4%, and Tasmania rising by 11.7%. In contrast, Queensland, Western Australia and South Australia fell by 11.3%, 5.1% and 0.9% respectively.

In line with the favourable building approval trends, the housing construction sector showed signs of recovery. Residential construction value rose 0.8% to $24.28 billion in the June 2025 quarter, continuing the rebound from the lower activity levels recorded in 2023. This increase reflects stabilising building costs and declining borrowing costs, and signals the resurgence of residential investment. However, persistent challenges – particularly trade labour shortages and capacity constraints – continue to weigh on the sector. Economists forecast growth in the construction industry but note that delivery risk will persist until labour and capacity supply improve.

Zooming out to national trends, dwelling approvals remain subdued, extending a three-year pattern of underperformance. The sluggish pace stems from deep-rooted planning challenges, exacerbated by bureaucratic delays and widespread community opposition to development. According to the Property Council, only 47% of NSW councils are meeting their residential development assessment processing targets, and just 171,394 new homes were approved nationwide in 2024 – far below the 240,000 annual approvals needed to meet the National Housing Accord’s goal of 1.2 million new homes by 2029.

Compounding these challenges, high interest rates, elevated land prices, and persistent construction cost pressures have continued to weigh on developer activity. However, potential policy tailwinds—such as fast-tracked development approvals – could offer relief. The NSW Government has introduced a five-year housing completion target for 43 local government areas, spanning Greater Sydney, Illawarra-Shoalhaven, Central Coast, Lower Hunter, and Greater Newcastle, with a broader statewide target of 377,000 new homes by 2029 under the National Housing Accord. These initiatives aim to foster the development of more diverse, well-located housing in areas with existing infrastructure capacity, such as transport and water services, supported by financial incentives and infrastructure funding to help councils meet their targets.

As of November 2025, the Australian housing market has generally stabilised into a consistent upward trajectory, with the national median dwelling price rising 2.8% over the last quarter to a new high of $872,538. Sydney retained its position as the nation’s most expensive market, with its median house price climbing to $1.256 million, a 2.3% quarterly increase. Brisbane was the second-most expensive market, rising 4.9% to $992,864. Other cities experienced varying levels of expansion; Perth (5.4%), Darwin (5.4%) and Adelaide (3.2%) experienced substantial gains, while Canberra (1.7%), Melbourne (1.6%) and Hobart (0.5%) experienced modest increases. Positive quarterly growth across all major cities indicates that housing prices are likely to continue trending upward as the RBA continues to ease monetary policy.

The total value of residential dwellings across Australia climbed to $11.564 trillion, and the mean dwelling price rose to $1.017 million this quarter. Additionally, the number of residential dwellings rose by 53,600 to 11.373 million. Rising land prices continue to reshape buyer preferences, pushing demand toward more affordable regions and away from high-cost metropolitan areas such as Sydney, where land price per square metre is more than double the national median of $884.

The latest data from September 2025 reveals broad-based declines in Australia’s rental vacancy rates. The national rate dropped to a record low of 1.47%, less than half the pre-COVID decade average of 3.3%. This is reflective of ongoing scarcity and surging demand, noting that a threshold rate of 3% is typically associated with a balanced market. Additionally, none of Australia’s major cities recorded positive annual increases, with particularly substantial drops recorded by Hobart (-1.2%), Canberra (-0.8%) and Sydney (-0.7%), and moderate declines recorded by Brisbane (-0.4%), Melbourne (-0.3%), Perth (-0.3%) and Adelaide (-0.3%).

For private credit markets, declining rental vacancy rates signal ongoing demand for housing, reinforcing investor confidence in real estate-backed lending. This is evident in the elevated portion of home lending comprised by investors, which grew to 40.61% of total loan commitments originated in the September 2025 quarter. However, this uplift in investor activity has not translated into a meaningful expansion of rental supply. National rental listings remain constrained, sitting 25% below the previous five-year average over the four weeks to September 28, with unit listings in particularly short supply.

Australia’s rental market has re-accelerated after a period of easing, with conditions tightening once again across most regions. Seasonally adjusted national rents rose 1.4% in the September quarter, the strongest quarterly increase since mid-2024, while annual growth lifted to 4.3%, up from a recent low of 3.4% in May. Supply constraints remain the central driver of this renewed upswing, with national rental listings sitting roughly 25% below average. Although unit rents have led annual growth trends, momentum is now broadening, with house rents outpacing unit rents across all capital cities over the quarter. Regional markets continue to outperform the capitals on an annual basis, though growth across the capitals is now gathering steam. National gross rental yields have edged down to 3.65%, their lowest level since late 2024, reflecting dwelling values rising faster than rents since the first rate cut in February.

Sydney’s rental market remains the most expensive and among the tightest in the country, underscored by persistent undersupply and strong demand. The typical Sydney dwelling now commands $807 per week, with houses at $841 and units at $753, reaffirming the city’s position as Australia’s priciest rental capital. Vacancy pressures remain acute, with rental listings well below historical averages and affordability increasingly stretched – conditions mirrored in other low-vacancy markets such as Adelaide, where rent growth has recently eased as tenants reach affordability limits. Population growth, limited new housing supply, and rising construction costs continue to place upward pressure on rents nationwide, with cities like Darwin (+7.6%), Brisbane (+5.6%) and Sydney (+3.5%) leading the reacceleration in annual rental growth over the quarter. Despite this renewed upward pressure, Melbourne remains the outlier, recording the softest annual increase at just 1.4%, equivalent to a $9 weekly rise.