Michael Yardney , Founder
Sydney’s home value growth has moderated, recording a 0.5% rise in November, well below the national figure of 1.0%.
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:
| Market Segment (by Value) | Monthly Value Growth (November) | Annual Growth Rate |
|---|---|---|
| Upper Quartile (Premium) | 0.0% | 7.8% |
| Lower Quartile (Affordable) | 1.0% | 9.3% |
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:
| Economic Factor | National/Local Status |
|---|---|
| National Value-to-Income Ratio | 8.2x (Near Record High) |
| % Income for Mortgage Service (National) | 45% (Near Record High) |
| Sydney Listings (vs. 5-Year Average) | 4.5% below 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
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.
