Every state and territory capital city recorded price increases in 2025, with Darwin leading at 18.9%, followed by Perth at 15.9%, and Brisbane at 14.5%. Sydney, Australia's most expensive city, saw a more modest gain of 5.8%, bringing its median value to over $1.28 million. Economists expect this upward trend to continue, albeit at a slightly slower pace, due to persistent demand outstripping supply.

However, affordability remains a significant concern. Nationally, rents increased by 5.2% in 2025, and over the past five years, they have risen at an average annual rate of 7.4%. This trend places additional pressure on prospective first-home buyers, many of whom are already grappling with the challenge of saving for a deposit amidst rising living costs.

Historically, the cost of an average city home has increased from about $64,000 to almost $1 million over the past four decades. This escalation means that the ability of younger Australians to purchase a home is increasingly influenced by their parents' financial assets rather than their own income, highlighting a growing generational divide in housing affordability.

In summary, while the Australian property market is expected to continue its upward trajectory in 2026, prospective first-home buyers should be prepared for ongoing challenges related to affordability and competition. Staying informed about market trends and exploring available government incentives will be crucial steps in navigating this dynamic landscape.