Sydney’s housing market has officially set a new benchmark, with the median house price reaching an unprecedented $1.76 million, according to recent data from Domain. This figure marks the highest on record and represents the twelfth consecutive quarter of growth, defying expectations of a market slowdown. The surge is attributed to a combination of limited housing supply, strong investor demand, and population growth driven by migration.
Despite the prevailing higher interest rates, competition among buyers remains fierce, pushing prices upward. Property economist Nicola Powell voiced concern over the implications of these rising costs, stating, “Affordability is no longer just a challenge—it’s a crisis.” She emphasized that for many average households, purchasing a home now requires significant financial assistance or inheritance.
Melbourne’s Strong Recovery
Meanwhile, Melbourne has rebounded impressively after experiencing stagnation during the pandemic. The city’s median house price has climbed to $1.11 million, marking its highest level in four years. This recovery is highlighted by a 7.4 percent increase in house prices in 2025, particularly noted in the December quarter when gains were most robust. Real estate agents are now reporting a renewed confidence among buyers, particularly in inner-city suburbs.
Real estate agent James Ross remarked, “Melbourne is back,” noting the return of competitive auctions as families and investors drive prices higher.
Perth Joins the Million-Dollar Club
Perth recently crossed the million-dollar threshold, with its median house price reaching $1.09 million by late 2025. The city experienced a remarkable 9.9 percent jump in the December quarter, making it the fastest-growing market among all Australian capitals. This surge is primarily attributed to strong demand from workers in the mining sector and interstate migrants seeking more affordable housing compared to Sydney and Melbourne.
However, this milestone has raised concerns that Perth could lose its status as a relatively affordable city.
As it stands, Australia now has six capital cities with median house prices exceeding $1 million: Sydney, Melbourne, Brisbane, Adelaide, Canberra, and Perth. Adelaide crossed this threshold in April 2025, while Brisbane remains the second-most expensive city after Sydney. Nationally, the median house price has soared to nearly $1.3 million, reflecting a 9.6 percent increase in 2025 alone.
Impact on Families and Government Response
The escalating prices are making the dream of homeownership increasingly elusive for many Australians. A recent survey revealed that 70 percent of renters under 35 believe they will never be able to afford a home. Many families are turning to the “Bank of Mum and Dad,” relying on parental assistance to make their housing dreams a reality. One Sydney teacher, Sarah Nguyen, shared her struggles: “Without family help, it’s impossible. Even with two incomes, we can’t compete with investors or people with large deposits.”
In response to the affordability crisis, the Albanese government has pledged to bolster housing supply and provide incentives for first-time buyers. These initiatives include funding for social housing projects and efforts to streamline planning approvals. Yet, critics argue that these measures fall short. Max Chandler-Mather, the Greens housing spokesperson, stated, “We need bold action, not incremental steps.” He called for addressing speculative investment and treating housing as a right rather than a commodity.
Investor Influence and Global Context
Investors continue to play a significant role in the Australian housing market, driven by a 10 percent rise in rental prices nationwide in 2025. The attractiveness of property ownership for investors seeking returns is evident, but economists warn that this investor-driven growth exacerbates affordability issues, pushing prices higher and sidelining first-time buyers.
This phenomenon is not isolated. Australia’s housing boom reflects trends in other global cities, such as Toronto, Vancouver, and London, where affordability has become a pressing concern. Economist Shane Oliver noted, “Property is Australia’s favorite asset class. Until that changes, we’ll continue to see prices rise beyond the reach of ordinary families.”
Risks and Future Outlook
Despite the current boom, several risks loom on the horizon. Rising interest rates could eventually dampen demand, while global economic uncertainty may affect investor confidence. Analysts caution that a potential market correction could occur if affordability pressures escalate to a breaking point. Nevertheless, for now, the market shows no signs of slowing. Powell reflects on this precarious situation, stating, “We’re in uncharted territory. The question is not whether prices will fall, but how long households can sustain this level of debt.”
The record-breaking median house price of $1.76 million in Sydney, along with Melbourne and Perth’s entry into the “million-dollar club,” signifies a crucial turning point in Australia’s housing landscape. With six capitals now surpassing $1 million, affordability remains a defining issue for families and a pressing challenge for policymakers. For investors, the current market presents an opportunity—at least for the time being.
