February Market Smart: The Downturn Disappears
Key Takeaways
- Housing Downturn Reverses – After three months of declines, national dwelling values rose 0.3% in February, signalling the end of the short downturn.
- Melbourne & Hobart Lead Recovery – Both cities recorded a 0.4% monthly rise, marking a notable turnaround after months of declines.
- Mid-Sized Capitals Slow – Brisbane (0.2%), Adelaide (0.3%), and Perth (0.3%) still recorded gains but lost their position as the strongest-performing markets.
- Regional Markets Maintain Strength – The combined regional index rose 0.4%, outpacing capital cities, with Queensland and South Australia leading the charge.
- Rental Growth Picks Up – National rents increased 0.6% in February, the highest monthly rise since May 2024, though annual rental growth is slowing.
- Listings Decline – New property listings were down 4.7% year-on-year, keeping supply tight in some markets and supporting price stability.
- Rate Cut Expectations Boost Sentiment – Buyer confidence improved as financial markets priced in multiple RBA rate cuts for 2025.
Market Trends
Home Values Bounce Back
After a three-month downturn that saw values slip 0.4%, February’s 0.3% national increase suggests market sentiment is improving. The rise was broad-based, with every capital city except Darwin (-0.1%) and Regional Victoria (0.0%) posting gains. Notably, Melbourne and Hobart (+0.4%) led the recovery. Melbourne’s growth is particularly significant as it breaks a ten-month streak of falling home values. Sydney also saw 0.3% growth, with higher-end properties driving the turnaround.
At the same time, Brisbane, Perth, and Adelaide, previously the strongest growth markets, recorded modest monthly gains of 0.2%-0.3%. Quarterly trends still show Adelaide (+1.2%) and Brisbane (+0.9%) leading, but Perth’s growth momentum has slowed significantly to just 0.3% over the past three months.
(CoreLogic, 2025)
(CoreLogic, 2025)
Regional Markets Continue to Outperform
Regional Australia remained a standout, with the combined regional index rising 0.4% in February. Over the past three months, regional dwelling values have increased 1.0%, compared to a 0.4% decline in the combined capitals. However, Melbourne and Hobart’s renewed strength means capital cities are beginning to close the gap. In New South Wales and Victoria, regional markets trailed their capital city counterparts for the first time in months.
(CoreLogic, 2025)
Rental Growth Shows Seasonal Uptick
Rental markets saw 0.6% national growth in February, the strongest monthly gain since May 2024. However, this is largely seasonal, as rental growth typically picks up early in the year.
On an annual basis, rents have risen 4.1%, but the pace of growth is slowing. Sydney and Melbourne’s unit rental markets, which surged during the migration boom, have cooled significantly. Sydney unit rents have slowed from 17.9% annual
growth in early 2023 to just 2.7% today, while Melbourne has dropped from 15.2% to 3.2%.
Rental yields remain firm at 3.7% nationally, with Perth (6.4%) and Adelaide (5.1%) continuing to offer the strongest gross rental returns.
(CoreLogic, 2025)
Lower Listings Keep Supply Tight
Despite easing demand, new property listings fell 4.7% compared to a year ago and remain 7.9% below the five-year average. This drop in fresh listings is likely adding some upward pressure on prices, particularly in areas where buyer sentiment is improving.
Total advertised stock levels are 1% higher year-on-year, but they remain below historical averages, meaning buyers in some markets still face competitive conditions.
Markets with the biggest inventory gains include Sydney (+6.9%), Melbourne (+3.9%), Hobart (+25.2%), and Canberra (+6.8%), offering more choice for buyers. In contrast, Perth (-28%), Adelaide (-33.9%), and Brisbane (-21.5%) continue to struggle with supply shortages.
Outlook: Rate Cuts Could Fuel Growth
The prospect of RBA rate cuts is helping to lift market sentiment, even though borrowing capacity hasn’t yet improved significantly. Financial markets are now pricing in at least two to three rate cuts in 2025, with a 95% probability of the first
reduction by mid-year.
Even with lower rates, affordability constraints and slower population growth could temper demand. Net overseas migration is expected to continue moderating, reducing rental demand and home-buying activity over the medium term.
Hobart, Canberra, and Melbourne—which saw the sharpest price declines during the downturn—could be well-positioned for a stronger recovery, particularly in premium market segments that tend to respond quickly to lower interest rates.
