We sat down with industry veteran, Tim Lawless from Cotality, to discuss the state of the Australian property market and uncover where opportunity lies in 2026 and beyond.
As we move through the second half of 2025, the housing market continues to show resilience, with values rising across all capital cities and most regional areas. Smart investors will continue to look for growth pockets and uncover potential among the noise.
The information provided in this article is general in nature and is not intended to be financial advice. We always recommend you seek your own, independent financial advice which can take into consideration your specific circumstances.
Q: Which city offers the best investment potential in the near future?
Darwin is currently leading in value growth, driven by high rental yields and a surge in investor activity—more than doubling over the past year. However the longevity of this trend is hard to know – the market is quite small and can be volatile.
Perth also looks to be picking up pace again, leading the state capitals for value growth, but it’s hard to see such a strong growth performance being sustained in the context of an 82% surge in values over the past five years.
South-East Queensland presents solid potential, supported by infrastructure investment ahead of the Olympics and strong interstate migration. That said, affordability pressures are starting to emerge.
Melbourne appears increasingly undervalued, with the gap between its median price and Sydney’s at its widest since 1999
Note: This is general commentary and not financial advice.
Q: Do you believe the traditional cycle of 7-8 years of growth still applies, or are we entering a new phase driven by different economic forces?
Relying on rules of thumb like a 7 year cycle doesn’t hold much weight for me. The recent cycles are a classic example. We saw housing values broadly rising between 2012 to mid-2017, albeit with some interruption and volatility from macroprudential credit tightening and the Royal Commission.
Values moved through a downturn between mid-2017 and started to rise in mid-2019, aligning with the federal election where property taxation reform was taken off the table, APRA loosened credit rules and interest rates came down.
The pandemic saw further policy response sending values higher between mid-2020 and mid-2022, but the rate tightening cycle resulted in a short but sharp correction over nine months before values started rising again despite rising rates due to an imbalance between supply and demand.
The point I’m making is that the cycles are determined by a range of factors including monetary policy (interest rate) fiscal policy (stimulus/gov spending), credit availability, shocks, supply disruptions etc.
Q: What is your outlook for the Melbourne and ACT property markets, considering they appear undervalued compared to other capital cities?
These are very different markets. Melbourne values are ‘only’ 15.6% higher over the past 5yrs while ACT is up around double this rate at 31.0%. ACT has seen a significant influx of multi-unit stock over the past decade… so has Melbourne, but not to the same extent (74% of dwelling completions over the past decade were in the multi-unit sector across the ACT compared with 41% in Vic). Given the amount of unit supply that is still under construction across the ACT, I would be a little cautious about this sector of the market which has clearly underperformed. Despite the 31% rise in values over the past 5yrs across the ACT, affordability is still relatively healthy with a dwelling value to income ratio of 6.0 thanks to higher household incomes.
Melbourne does look under valued to me, and investors are becoming more active across the market in the anticipation of capital gains and higher yields. While taxation disincentives are still in place, it looks like investors are becoming increasingly willing to look through higher costs for the opportunity of capital gains. It looks like interstate migration is about to move back into positive territory across Vic – another factor that should support demand.
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