In the race for property profits, it turns out the most humble homes are quietly stealing the spotlight. If you think luxury real estate always leads the way, pllease think again.
For years, Australia’s real estate market has danced to the tune of interest rates like dropping low, climbing high, and confusing even seasoned investors. But fresh data from PropTrack tells a compelling story: the most affordable homes have outpaced their pricier counterparts in cumulative price growth since 2020. And this trend could stick around.
Let’s break it down:
1. Luxury homes led early in the post-COVID boom.
Following a historic interest rate cut in November 2020, the high-end segment (top 5–25% in price) exploded in value. Confidence in premium real estate soared, and so did prices.
2. But the comeback kid? Budget homes.
When interest rates started climbing in May 2022 (with 12 hikes over time), the trend flipped. Suddenly, low-end properties (bottom 5–25%) were the stars. From mid-2022 to end-2024, their cumulative price growth doubled that of high-end homes. Affordability, it seems, became the new luxury.
3. Fast-forward to today.
From January to June 2025, high-end homes again showed short-term strength possibly a reflex to recent interest rate cuts. But zooming out tells a different story. The winner is low-tier homes.
Over the full stretch from January 2020 to June 2025:
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Low-tier homes: +67%
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Mid-tier homes: +52%
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High-tier homes: +47%
That’s not the most “affordable” homes have delivered the highest returns over time.
What’s driving this?
Despite the slight relief from rate cuts in 2025, interest rates remain higher than any point since 2012. Affordability is still a serious issue. According to PropTrack’s 2024 Housing Affordability Report, a household earning $112,000/year can only afford 1 in 10 properties.
So, buyers are shifting toward what they can actually buy and demand is heating up in the low-end market.
What’s next?
If rate cuts continue, borrowing capacity may increase which could benefit the mid- and high-tier markets again. But if rates stall or only ease slightly, don’t be surprised if the low-end market keeps leading.
Because let’s face it: In a world of high interest and tight budgets, the home you can afford might be the one that grows the most.
