In 2025, Sydney’s property market entered a phase of stabilisation following the volatility and transition experienced in recent years. Economic conditions, interest rate settings and buyer sentiment combined to create a more measured market environment throughout 2025.

Early in the year activity remained cautious as all eyes were on the Reserve Bank and the inflation rate. Confidence gradually improved as signs that inflationary pressures were easing more quickly than expected and the Reserve Bank cut rates by 25 basis points in February and again in May.

Falling inflation, a strong labour market, constrained long-term supply and continued population growth pointed to a robust year of growth. Unfortunately, this didn’t eventuate in the Sydney property market.

The market again demonstrated clear segmentation. Scarcity-driven, blue-chip assets demonstrated resilience, while mortgage-sensitive middle and outer-ring markets became increasingly price-conscious. This divergence created a constructive environment for strategic buyers able to act selectively and negotiate effectively.

Below, we draw on CoreLogic Property Data and the Cotality Home Value Index (HVI) to highlight the structural drivers, and strategic insights from across 2025 to provide a clear view of Sydney’s residential market heading into 2026. 

_{Market Overview and Performance}

Home Values

Sydney dwelling values returned to modest, uneven growth through 2025 following the cooling phase of late 2024. According to CoreLogic and the Cotality Home Value Index (HVI), dwelling values rose by approximately 0.5% in November 2025, lifting annual growth to around 5.1%.

Indicative median values across Sydney sat within the following ranges:

• Houses: $1.55m – $1.60m
• Units: $880k – $900k

Growth was not uniform. Premium tightly held suburbs showed greater resilience due to chronic supply shortages, while discretionary and mortgage-sensitive segments experienced softer conditions and greater negotiability.

A Two-Speed Market

Throughout 2025, Sydney continued to operate as a two-speed market:

• Prestige and blue-chip suburbs outperformed, supported by scarcity, wealth concentration, and lower sensitivity to interest rates.
• Middle and outer-ring markets remained more price-sensitive, offering improved negotiation opportunities for well-prepared buyers.

Prestige Sydney Market Performance

Cotality’s 2025 Best of the Best analysis reaffirmed the strength of Sydney’s prestige market. Despite affordability pressures nationally, blue chip suburbs continued to operate on a separate cycle.

• Point Piper led the market nationally, with median house values around $17.3 million and unit medians above $3.1 million.
• Other standout suburbs included Bellevue Hill, Vaucluse, Tamarama, and Rose Bay.

Mosman was particularly notable, recording the highest total house sales value in Australia for 2025, with approximately $1.58 billion transacted across 229 sales. This highlights the depth of demand in tightly held harbourside property markets both sides of the Harbour.

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Sales Volumes and Market Activity

Transaction volumes across Sydney remained below long-term averages in 2025. Buyer caution, finance constraints, and longer decision-making cycles all contributed to reduced turnover.

• Well-priced, high-quality properties continued to transact efficiently.
• Over-priced or compromised stock experienced extended days on market.
• Vendor expectations gradually adjusted, improving clearance rates for quality assets in the second half of the year.

Auction Clearance Rates

Sydney auction clearance rates generally tracked in the low-to-mid 60% range throughout 2025, consistent with balanced to buyer-leaning conditions. Premium pockets and school catchment areas outperformed broader averages.

^{Key Market Drivers in 2025}

Interest Rates

We began the year with the RBA cash rate at 4.35%, the level it had been at since November 2023. With inflationary pressures easing, the RBA cut the official cash rate by 25 basis points in February, May and again in August to land at the current cash rate of 3.6%. Average variable mortgage rates hovered between 6.25% and 6.5% at the beginning of the year and dropped to 5.25% - 5.5% mid-year and are currently around 6.5%- 6.75%, materially constraining borrowing capacity.

While the absence of aggressive rate cuts capped price growth, stability itself improved confidence by removing the fear of further rapid tightening.

Resurgent inflation and strong household spending halted the cuts, with the RBA holding at 3.60% in December 2025, and expectations now shifting towards a hike in early 2026

This shift has had a clear impact on buyer behaviour. Borrowing capacity remains constrained, lending criteria has tightened and many buyers - even at higher price points—are adopting a cautious, wait-and-see approach. Decision-making cycles have lengthened, and price sensitivity has increased.

For sellers, this environment has resulted in a more discerning buyer pool and fewer emotionally driven purchases.

Affordability

Sydney remained Australia’s least affordable capital city. High price-to-income ratios limited entry-level demand and acted as a natural ceiling on rapid capital growth.

As a result:

• Buyers prioritised value and long-term liveability
• Units and townhouses gained relative appeal
• Compromises on size and location became more common

Supply and Listings

Listing volumes improved compared to prior years, easing urgency for buyers. However, total housing supply remained structurally constrained. Cotality data shows national listing levels remained approximately 18% below the five-year average, reinforcing long-term undersupply in established Sydney suburbs.

Planning Reform and Certainty Premiums

NSW Government planning reforms — particularly Transport Oriented Developments (TODs) and expanded Town Centre zoning — introduced long-term opportunity but short-term uncertainty.

• Transaction activity slowed in affected areas as buyers awaited clarity.
• Areas unaffected by rezoning benefited from a growing certainty premium, with buyers placing increased value on known planning outcomes.

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Rising NSW Land Tax

Rising land tax emerged as a meaningful behavioural driver in 2025. Higher holding costs prompted some investors and lifestyle owners to divest secondary properties, including holiday homes and hobby farms. These reluctant but motivated sellers quietly reshaped parts of the market.

^{Rental Market Insights} 

Vacancy Rates

Sydney vacancy rates remained tight at approximately 1.5%–2.0%, well below historical norms. Population growth, migration, and limited new supply continued to underpin rental demand.

Rents and Yields

Rents increased by approximately 4%–5% year-on-year. Despite strong rental demand, Sydney recorded among the lowest gross rental yields of the capital cities at around 3.0%, reflecting high asset values and rising holding costs. 

_{Strategic Opportunities for Buyers in 2025}

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• Improved negotiation conditions due to higher listings and reduced urgency
• Relative value opportunities in the unit market
• Counter-cyclical opportunities created by planning uncertainty
• Ongoing outperformance of scarcity-driven assets in blue-chip locations

Well-prepared buyers were able to negotiate price adjustments, extended settlements, and improved contract terms.

• Persistent affordability constraints
• Borrowing capacity pressure at elevated interest rates
• Increased holding costs for investors
• Competition for genuinely high-quality stock 

_{Outlook for 2026}

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Sydney enters 2026 on more stable footing. While supply remains constrained, affordability limits and borrowing capacity are likely to temper demand.

Key factors to monitor include:

• The pace and depth of interest rate policy shift. (tightening cycle)
• Population growth and migration trends
• Ongoing planning reform implementation
• Delivery of new housing supply

Any recovery is expected to remain uneven, with quality, location, and scarcity continuing to drive outperformance.

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Strategic Recommendations for Sydney buyers in 2026 include:

• Leverage current conditions to negotiate assertively
• Prioritise quality and scarcity in tightly held suburbs
• Focus on long-term fundamentals over short-term momentum
• Consider counter-cyclical opportunities, particularly in the unit market
• Structure purchases conservatively with strong due diligence 

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The stabilisation evident throughout 2025 created one of the most constructive buying environments in recent years. While growth was restrained, opportunity favoured informed and strategic decision-making. While demand for well-located, high-quality property remains resilient, conditions have become more complex and selective.

2026 will be a year where the market is defined by uncertainty around interest rates, significant planning reform, and rising holding costs.

As always, clarity, preparation, and local market knowledge will be critical in navigating the year ahead.

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