Property prices lift again but outlook remains cautious

October brought another small lift in median property values, with prices rising 0.2% for the month following a 0.1% increase in September. These back-to-back gains come after five consecutive monthly declines between April and August.

Cotality Chief Property Economist Kelvin Davidson said this might signal the early stages of a recovery, although he urged caution. “It’s a cliché, but upturns obviously have to start somewhere, and the recent emergence of small increases in property values would certainly be consistent with the falls in mortgage rates over the past year or so,” he said.

Mr Davidson added that sentiment remained subdued despite the improvement. “That being said, sentiment remains tilted to the cautious end of the spectrum, and of course, the economy and labour market are still subdued. Meanwhile, the gains in September and October were clearly reasonably small in the grand scheme of things.”

Lending rule changes could influence activity

Mr Davidson said the decision to ease loan-to-value ratio (LVR) rules from 1 December would probably benefit investors more than owner-occupiers, although the scope for more pre-approvals for low-deposit loans might bolster first home buyers.

“We’ve seen in the past that banks tend to act early on these rule changes, so the effects may start to show through even as soon as the release of October’s mortgage lending stats in late November.”

A steady, not spectacular, 2026 outlook

Looking ahead, Mr Davidson said a gradual improvement was likely rather than a rapid rebound. 

“With mortgage rates already having fallen a long way, housing affordability more favourable, listings down a bit and the economy set to improve, 2026 looks likely to see a rise in both property sales activity and house prices,” he said.

However, he also encouraged buyers not to be too concerned about falling behind. “After all, with the stock of housing having risen in recent years relative to population, and debt-to-income ratio caps also now in action, only a modest rise in prices of perhaps 5% or less seems more likely than a fresh boom.”

Mr Davidson said values remaining around 17% below their early 2022 peak could present opportunities for both owner-occupiers and investors.

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