Sydney housing market update [video] | December 2025

Key takeaways

Home values rose by 0.5% in November, suggesting the market may have passed its cyclical peak (0.9% in August) due to affordability constraints.

The upper quartile of the market saw zero growth (0.0%), while the lower quartile continued to rise strongly (1.0%), reflecting a demand shift toward affordable segments.

Stretched national affordability (8.2x value-to-income ratio) and high mortgage service costs (45% of income) limit potential growth and drive the current two-speed market.

Sydney's home value growth has moderated, recording a 0.5% rise in November, well below the national figure of 1.0%.

Note: It is highly likely that the Sydney market has passed its cyclical peak of growth, which was recorded at 0.9% in August.

Since then, the rate of capital gain has been easing, a trend that coincides with softening auction clearance rates, which held in the high-60% range throughout the latter half of the month.

Price Dynamics by Segment

The primary factor constraining growth is record low housing affordability and severe serviceability barriers. These issues are actively diverting demand towards the more affordable price points of the market, creating a distinct two-speed trend:

Source: Cotality, December 2025

National Economic Headwinds and Supply

The Sydney market operates within a complex national environment where acute supply shortages are fighting against worsening serviceability and affordability.

Despite the slowdown in growth, supply levels remain low compared to the 5-year average:

Source: Cotality, December 2025

The expectation that interest rates will be held high for an extended period exacerbates serviceability issues, as any recent marginal increase in borrowing capacity has been eroded by rising home prices.

Regulatory Risks and Outlook

Note: The introduction of a 20% limit on high Debt-to-Income (DTI) ratio lending signals regulator (APRA) vigilance regarding rising household debt levels.

A more significant policy adjustment, such as renewed limits on investor credit growth, remains a key downside risk, given that investors comprise 41% of national housing credit.

Despite the moderation, low supply remains the central factor supporting Sydney home values. However, as affordability and serviceability barriers continue to rise, the pace of capital gains is likely to be capped.

About Tim Lawless Tim is Research Director at Cotality (formerly CoreLogic), analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au