Why Australian House Prices Keep Rising | Market Insights

By Guest Blogger, Pete Wargent, 

Next Level Wealth 

Water cooler conversations

Buyers in today's market trying to buy a home will be often shocked at how much house prices have risen over recent decades.

Even just looking back to 2010, Sydney's median house price was just $645,000.

Today the median house price is around $1.7 million, equating to a compound annual growth rate of about 7 per cent per annum.

At this pace of growth, house prices approximately double each decade, on average.

Typical Aussie barbecue and water cooler conversations can revolve around real estate, and we often hear people suggesting that property prices won't be able to rise much further.

But is that really the case?

Let’s take a look at some of the factors driving supply and demand, and what’s most likely going to come next.

Today’s median prices

In the larger capital cities there are many more attached dwellings these days – terraces, townhouses, duplexes, and units – so people don’t only buy detached houses.

Nationally home prices increased 0.7 per cent in the month of August 2025, to a median value of approximately $849,000.

Source: Cotality

Of course, these are median values, and there are many cheaper options for first homebuyers wanting to take their first step on to the ladder (for example, through buying a unit, or by buying in one of the cheaper suburbs).

Factors supporting higher house prices

What are the key factors that have driven house prices to these record levels?

And what is the scope for them rising further over the next one to two decades?

Since the turn of the century, Australia went through a resources construction boom as China’s massive population urbanised, creating unprecedented demand for Australian iron ore, coal, gas, copper, and many other minerals.

This massive boost to the Aussie economy then parlayed into a demographic or population boom, seeing record levels of immigration.

With exceedingly high wages growth and the economy booming, housing prices naturally followed suit, especially in some of the mining towns and resources states.

After the construction phase of the mining boom peaked, interest rates fell sharply, increasing borrowing capacities.

And although growth in the economy was inevitably slower, both sides of politics have remained wedded to the policy of high population growth, to help offset the ageing of the population, to increase skills and participation rates, and to support the tax base.

The next two decades

Whether these same factors will apply for the coming decades is a different question.

It certainly looks likely that we will experience strong ongoing population growth, high numbers of international students, and ongoing large export revenues from our resources.

Although it was possible for Australia to supply the right types of housing at pace after World War II, it’s much harder to achieve this today since land prices are higher, housing specifications have changed markedly, and the capital city populations have already sprawled so much further afield from the key employment hubs.

At present we simply aren’t building enough volume for the level of demand, and the housing shortages have continued to worsen.

It’s also been taking much longer to build housing due to cost overruns, confidence in the construction sector, and a surge of insolvencies.

Source: Cotality

Construction costs have been rising consistently for the past six decades, partly due to materials costs, partly due to changing preferences and specifications for the new housing stock, and largely because the construction sector labour force in Australia is heavily unionised, ensuring endlessly higher rates of pay over time.

But will this be enough for everyone to continue affording housing if prices continue to rise?

It may not be, and for this reason, in a high immigration country it looks likely that Australia’s globally high rate of home ownership could drop back towards 50 per cent.

For the wealthier households with existing equity, housing affordability is a totally different equation.

I was looking at the Reserve Bank’s Financial Aggregates figures last month, and they showed mortgage credit of around $2.45 trillion…which sounds like a lot until you map it against the total value of housing stock which is surging higher towards $12 trillion.

Mortgage debt at around 20 per cent of housing values suddenly doesn’t sound quite so heavily leveraged or stretched.

Also, somewhat uniquely in Australia, we have widespread use of mortgage prepayments and mortgage buffers, meaning that there’s a lot of potential firepower sitting on the sidelines as and when sentiment for property picks up.

Looking ahead

Based on decades of available data, on the balance of probabilities, property prices well likely continue to rise at various rates depending on the combination of drivers at play in the specific location.

As both sides of politics continue to pursue a high population growth policy, it’s quite likely that home ownership rates will decline.

There will be more renters, and not everyone will participate or enjoy rising housing prices.

Not all areas will increase in value at the same rates, so it pays to consider using a buyer’s agent to help you pinpoint the high growth areas

Pete Wargent

petewargent.blogspot.com.au

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