Why Australia’s Property Market Is Holding Strong While the UK and New Zealand Decline

While property prices tumble in markets like New Zealand and the UK, Australia’s housing market continues to defy expectations — with values holding steady or even climbing in key regions. Inflation, too, is proving stickier here than in many comparable economies.

So what’s propping up Australia’s housing prices while other nations cool off?

Let’s unpack the key differences driving Australia’s resilience.

1. Migration: Australia’s Population Boom Is Fuelling Demand

One of the most significant factors keeping Australia’s property market buoyant is record-breaking migration.

Australia’s net overseas migration hit over 500,000 people in 2023, and demand for housing has surged alongside it. The rapid influx of skilled workers, international students, and returning citizens has overwhelmed rental supply and nudged buyers back into a competitive market.

In contrast:

• New Zealand and the UK have experienced far more modest population growth.

• Both nations have also faced policy tightening around immigration and less aggressive student intake post-COVID.

In simple terms: more people = more pressure on housing, and Australia’s supply hasn’t kept up.

2. Undersupply of Housing in Australia

Australia’s chronic housing undersupply is another key factor.

While governments promise hundreds of thousands of new homes, completions are falling short due to:

• Labour shortages in construction,

• Rising material costs,

• Planning delays and zoning restrictions.

According to the National Housing Finance and Investment Corporation (NHFIC), we’re facing a housing shortfall of over 175,000 homes by 2027.

New Zealand, by comparison, launched aggressive housing reforms earlier — relaxing planning rules and incentivising build-to-rent models. The UK has also ramped up supply-side measures in parts of the country. Australia, meanwhile, is lagging on structural supply reform.

3. Interest Rate Sensitivity and Mortgage Buffering

In the UK and New Zealand, interest rate hikes have hit households hard and fast. Both countries have more variable-rate or short-term fixed mortgages, meaning borrowers felt the squeeze earlier.

In Australia:

• Many borrowers locked in ultra-low fixed rates during COVID.

• The RBA raised rates later than other central banks.

• Banks enforced stronger serviceability buffers, so many borrowers are still managing despite rate rises.

This has delayed widespread mortgage stress and prevented a wave of forced sales, helping to keep property prices stable.

4. Inflation Drivers Are Different in Australia

While inflation is cooling in much of the world, Australia’s inflation is proving stickier — especially in housing-related categories.

According to the ABS:

• Rents rose 7.8% in the 12 months to May 2025.

• Insurance, energy, and construction costs remain high.

• Services inflation — things like childcare, health, and education — continues to rise.

Much of this is demand-driven, unlike overseas markets where energy or supply shocks played a larger role.

Economist Sarah Hunter from KPMG said:

“Australia’s population surge is having a direct effect on demand for housing and services. That demand is keeping inflation elevated and property prices supported.”

5. Investor Confidence and Global Perception

Australia remains a highly attractive market for both local and foreign investors:

• Stable economy,

• Strong legal framework,

• High rental yields in key regional markets,

• Long-term capital growth in cities like Brisbane, Perth, and Adelaide.

By contrast, the UK’s property market is grappling with Brexit fallout, and New Zealand introduced tough investor restrictions — including caps on interest deductibility — that spooked many landlords.

Australia’s governments, despite tightening lending and tenancy laws, have avoided measures that dramatically undermine investor confidence.

In Summary: Why Australia’s Housing Market Remains Resilient

Factor	Australia	UK / New Zealand
Migration	Booming (record highs)	Modest or declining
Housing Supply	Chronic undersupply	Improved supply policies
Interest Rates	Gradual shock	Earlier, sharper rate shock
Inflation	Demand-driven, sticky	Cooling faster
Investor Policy	Still supportive	More restrictive

What Happens Next?

There’s no doubt the Australian property market will continue to face headwinds — especially if interest rates remain high into 2026. But unless migration slows or construction catches up dramatically, the fundamental mismatch between demand and supply will likely support prices and pressure rents for some time to come.

As AMP Chief Economist Shane Oliver put it:

“We’re not immune to global trends, but Australia’s housing crunch is uniquely our own. Until we fix supply, prices will remain elevated — especially in major cities and fast-growing regional hubs.”