$2 million houses & $1 million units: Sydney’s new normal

Scott Kuru June 5, 2025 4 min read

Image from ABC News/Keana Naughton

KEY POINTS

Ray White’s data shows Sydney’s median house price hit $1.62 million in May 2025, with projections nearing $2 million by end-2026; unit prices nearing $1 million
Ongoing price rises in Perth and Adelaide should see median house prices in those cities pass the one-million-dollar mark next year
The real estate chain’s Chief Economist says a modest recovery has become a nationwide home price surge, fueled by consecutive RBA rate cuts and strong buyer demand

National real estate chain Ray White says Australia’s housing market is in an “acceleration” phase, with home prices surging beyond expectations and reshaping what buyers and investors must now accept as the “new normal.”

In Sydney, that means preparing for a median house price of $2 million - and unit prices crossing the $1 million mark - within the next 18 months.

The details

Data from Ray White’s own property research arm, Neoval, shows that momentum in the national property market that reignited in January 2025 after a short-lived downturn has gained considerable pace.

Neoval says the monthly data for May 2025 “confirms the housing market's relentless acceleration”, with national house prices rising 0.7% to reach $926,806, delivering annual growth of 5.2%.

“What began as a modest recovery from December's brief decline has evolved into sustained momentum that few predicted at the start of 2025,” says Ray White’s Chief Economist, Nerida Conisbee.

This has been driven by back-to-back interest rate cuts from the Reserve Bank of Australia (RBA) in February and May 2025 and strong buyer demand.

This property price uplift “has exceeded all expectations and is now pointing toward a dramatic reshaping of the national property landscape by the end of 2026,” she says.

“What started as expectations of modest growth has evolved into conditions similar to 2021, far exceeding early-year predictions.”

Sydney, long Australia’s most expensive housing market, is leading the charge, with a large 1% lift in house prices in May 2025 alone, according to Neoval.

The median house price in the Harbour City now sits at $1.627 million.

If current growth rates continue - and with the prospect of more RBA rate cuts this year, Ms Conisbee believes Sydney’s median house price is on track to hit $2 million by the end of 2026.

“Given Sydney’s sensitivity to rate cuts, and the potential for more cuts coming through this year, hitting a $2 million median seems possible by the end of next year,” the Ray White Chief Economist says.

The city’s unit market is accelerating too.

With a current median of $900,289, at current momentum, million-dollar apartments are on the horizon, marking a significant shift in affordability for first-home buyers and investors alike.

The property rally is not confined to Sydney.

In Perth and Adelaide, house prices are also climbing rapidly, pushing both capitals closer to the million-dollar median club.

Perth posted a striking 1.2% rise in May, for a total annual growth rate of 10.8%, pushing the median house price to $922,250.

Ms Conisbee says that figure puts the Western Australian capital just eight months away from a $1 million median if the current pace continues.

Adelaide is tracking similarly, with home values up 7.1% over the year to a median of $912,728 - just over a year away from joining the same club.

At the current rate of growth, “only Hobart and Darwin will retain house medians below one million dollars,” Ms Conisbee says about the short-term picture.

Neoval’s figures also show Melbourne is bouncing back strongly from a sustained period of low and sometimes backward price growth.

House price growth in the Victorian capital was 0.6% during May 2025, and totalled 1.4% over the past year.

Units in Melbourne grew at 0.5% in May, helping to eke out 1.1% annual growth.

Regions

Regional areas are also experiencing renewed momentum, according to Neoval.

Regional Western Australia topped the charts with a strong 11.5% annual growth in house prices, while Regional South Australia wasn’t far behind at 10%.

With more Australians moving to lifestyle regions post-pandemic and flexible work arrangements here to stay, regional property markets continue to attract both owner-occupiers and investors—particularly in areas offering greater affordability relative to capital city counterparts.

Supply

One key driver of the ongoing price boom is the persistent shortage of new housing.

Construction activity remains hampered by high labour costs, material shortages, and delays.

“The construction industry's ongoing struggles with labour shortages and material costs create supply bottlenecks that cannot be resolved quickly,” Nerida Conisbee says.

“In addition, land prices aren’t coming down and will in fact be supported by lower rates.”

Risks

While Ray White’s outlook for property prices remains bullish, Ms Conisbee points to several risks that could cool the market’s momentum.

“Rising unemployment resulting from slowing global economic growth triggered by trade tensions could weaken buyer demand, despite interest rate cuts providing some offset,” she says.

“Perversely, the current surge in prices may kick-start more development projects as margins become attractive enough to overcome construction challenges, ultimately increasing supply.

“However, given the time required for new projects to reach market, any supply response would likely take years to meaningfully impact prices.”