InvestorKit’s latest Overvalued or Undervalued whitepaper revealed that only seven of Australia’s 33 most populated cities are classified as undervalued, amid rising property listings, improving market sentiment, and continued home value growth.
“With mortgage rates expected to remain high over the coming year, affordable markets will continue to be highly sought after,” said Junge Ma (pictured), senior research analyst at InvestorKit.
Ballarat’s housing market has seen a notable shift. After declining house prices since late 2023, the city has moved from being overvalued to undervalued.
“Currently, the median price is undervalued by 10% when the home loan interest rate is 6.5% and would be undervalued by 37% if the home loan interest rate were to fall to 4.5%,” Ma said.
While market pressure has eased, resulting in a -5.4% annual decline in house prices, rental demand remains strong. Vacancy rates have stayed below 2%, offering investors a moderate rental yield of 4.3%.
“Given Ballarat’s low market pressure, we expect the city to stay low-key for the remainder of 2025, gathering momentum for the next growth cycle,” Ma said.
Darwin stands out as the only capital city still undervalued, with median house prices sitting 14% below affordability thresholds at current interest rates.
“Its median house price is lower than the affordability level by 14% when the home loan interest rate is 6.5% and would be undervalued by 42% if the interest rate were to drop by 2%,” Ma said.
Market conditions are improving with fewer listings, increased sales, and shorter sale times.
Investors are also drawn by the highest rental yield among capital cities, at 6.2%.
“The improving market pressure suggests that Darwin is expected to grow faster in the rest of 2025,” Ma said, although she cautioned that “the local economy is less resilient” due to its heavy reliance on mining.
After a 28% surge in house prices over the past year, Bunbury’s affordability is tightening.
“The median house price is now undervalued by just 0.2% at a 6.5% interest rate and would be undervalued by 25% if the home loan interest rate were to decrease to 4.5%,” Ma said.
Although the market remains under pressure with low inventory and fast sales, signs of easing are emerging. The rental market remains tight, with a crisis-level vacancy rate of just 0.3% and an average rental yield of 5.5%.
“Given Bunbury’s high market pressure in both the sales and rental markets, we expect further solid growth in the rest of 2025,” Ma said.
Mackay continues to be one of the hottest housing markets, growing 17% in the past year while maintaining strong affordability.
“The current median house price is below the affordable threshold by 20% when the home loan interest rate is 6.5% and would be undervalued by 50% if the home loan interest rate decreased to 4.5%,” Ma said.
Rental demand is extremely strong, with vacancy rates around 0.5% and rental yields at 6.2%.
“Given the high market pressure, we expect another year of robust growth in Mackay,” Ma said.
However, the InvestorKit analyst warned that Mackay’s economy, like Darwin’s, is heavily reliant on mining, which “makes it less resilient to shocks.”
