Whether you’re a newcomer buying your first investment property or a seasoned investor refining long term strategies – we thank you for your continued trust in our insights. As established members of our community, we know you appreciate the nuances of navigating our dynamic property markets. This end of 2025 re-cap dissects the Reserve Bank of Australia (RBA) interest rate movements throughout the year, analyses national trends, and highlights standout performers like Perth and Townsville for capital growth. Drawing on the year’s data, we aim to equip you with actionable intelligence to inform your 2026 decisions.
RBA Interest Rate Trajectory: From Caution to Calculated Easing
The RBA’s policy shaped the year’s narrative, balancing inflation control with economic stimulus. Starting from higher levels amid lingering post pandemic pressures, the Board held rates steady in early meetings. A pivotal shift occurred with the first cut, reducing the cash rate by 25 basis points to 4.10%, while subsequent adjustments brought it down to 3.60% by mid-year. Here it stabilised through to the final December 2025 meeting – reflecting subdued inflation and steady employment around 4.5%.
These cumulative cuts of more than 50 basis points lowered borrowing costs, reigniting property buyer activity. Mortgage affordability improved, with variable rates easing for investors. National dwelling values responded robustly, climbing approximately 8% for the year, per market analyses – outpacing initial forecasts despite supply increases in select areas. Growth was broad-based: capital cities averaged 0.4 to 0.5% monthly rises by mid-year, while regions outperformed in patches. Quarterly momentum softened later in the year, with houses and units showing divergent paths.
For those holding existing property portfolios, this easing cycle offered refinancing opportunities and the merits of fixed-rate locks are seemingly back on the table. Investors who timed their property purchases post cuts captured uplift, but vigilance on unemployment forecasts remains key.
Perth: The Unrivalled Capital Growth Leader
Perth dominated 2025 rankings, validating its multi-year surge. House values soared 18-24% annually in peak periods, with medians hitting $745,000 to $895,000 by late year – up $142,000+ in some metrics. Five-year cumulative growth exceeded 75-84% since 2020, driven mostly by mining recovery, interstate migration, and affordability versus Sydney or Melbourne. Units mirrored this, rising 10%+ yearly with medians around key thresholds, bolstered by low vacancies and first-home buyer incentives.
Suburb-level hotspots, from coastal enclaves to inner-ring growth corridors, featured family houses yielding 21-22% jumps. REIWA data highlighted January’s 23% year-on-year median rise to $750,000, moderating to steady 1-5% quarterly gains. Tight supply, robust rentals, and LNG projects fuelled this resilience, positioning Perth for 5-7% 2026 growth forecasts.
Townsville: Regional Powerhouse with Explosive Momentum
No review is complete without Townsville, Queensland’s tropical standout that topped national charts. Dwelling values rocketed 17.6% in 12 months to a $569,000 median, with quarterly surges of 2.8-3% and annual peaks reaching a stunning 23-28% for houses and apartments. Five-year gains hit 71.7%, propelled mainly by defence expansions, mining and energy infrastructure, post-flood recovery, and affordability drawing southern buyers.
PropTrack indices crowned it Australia’s hottest market multiple times, with 25-30% uplift predictions materialising early. Coastal suburbs led, offering high yields amid housing shortages. From March 2023 baselines, apartments climbed 29%, underscoring investor appeal in a diversified economy of mining, tourism, and renewables. For 2026, clusters around new projects promise continued outperformance over metros.
Strategic Outlook for 2026: Interest Rate Signals and Market Impacts
Looking ahead, expert commentary points to a more cautious RBA stance in 2026. Banks like NAB, CBA, and investment houses such as Barrenjoey and UBS have revised forecasts amid persistent inflation, now anticipating potential rate hikes in early to mid 2026 – possibly lifting the cash rate from 3.60% toward 4% or higher if price pressures re-accelerate. RBA Governor Michele Bullock has signalled readiness to raise rates if needed, with markets pricing in hikes by May amid unemployment steady at 4.5% and inflation hovering at the upper end of the 2% to 3% target.
Prominent commentator Mark Bouris has echoed this, warning of a “setback” for rate cut hopes after hotter-than-expected inflation data, suggesting the RBA may hold or increase rates into February 2026 and beyond. He advises steering clear of assumptions on further easing, highlighting policy lags and economic uncertainties.
These shifts could tighten lending conditions, with banks potentially slowing investor loans amid regulatory scrutiny – investor lending surged 17.6% in Q3 2025 but may slow down moving forward. For investors, this implies prioritising high-yield, undersupplied markets, where fundamentals buffer rate sensitivity. Growth may slow to 3-5% nationally, but resource-driven areas could sustain 5-7% uplifts. Refinancing now at fixed rates and stress-testing portfolios for 4.5%+ interest rate scenarios would be prudent considerations to explore.
Take the Time to Reinvest in Yourself
In summary, 2025 rewarded informed positioning amid easing, affirming our property’s cycle resilience. Into 2026, cautious optimism prevails amid hike threats – strategic clients (like you) are primed to capitalise.
We would like to take this opportunity to wish you all a happy holidays, from our PPA family to yours, as you celebrate any of the many festivities at this time of year. Enjoy the time and space with your loved ones. Laugh with those closest to you, and revel in the down time. Read a book, explore new places, or just rest and relax where you can. This investment in you will see you ready to meet whatever comes in 2026.
We look forward to talking more in the New Year.
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