Housing market trends: Perth rises quickly, Brisbane and Adelaide climb while Sydney and Melbourne stabilize

The Australian housing market in 2026 is showing a distinct divergence in trends, with Sydney and Melbourne experiencing a stagnation in home values, while mid-sized cities like Perth, Brisbane, Adelaide, and Hobart continue to see solid gains. Perth, in particular, has seen home values surge by 2.3% in February, adding significant value to the median dwelling price. This trend is mirrored in other mid-sized capitals, with rises of over 1% recorded in Brisbane, Adelaide, and Hobart during the same period.

Traditionally, Sydney and Melbourne have been the frontrunners in driving Australia’s housing market cycles. However, the current slowdown in these cities could potentially signal a future easing in growth conditions nationwide. Despite this, the mid-sized capitals are benefitting from extremely low levels of inventory, which are bolstering home values even as demand softens in larger cities.

The shortage of listings is particularly acute in Perth, where stock levels are nearly 50% below the five-year average. Brisbane and Adelaide also face similar constraints, with listings 31% and 23% below average, respectively. Sydney and Melbourne, while also experiencing low stock levels, have seen a recent increase in new listings, indicating growing vendor activity. The influx of new listings may be aimed at preempting a further softening in market conditions as clearance rates decline and demand wanes. It is anticipated that the flow of new listings will strengthen as we approach the Easter season.

Affordability pressures are reshaping demand in the housing market, with lower-priced segments and regions witnessing robust activity. First home buyers, investors, and subsequent buyers are all vying for properties in this sector, driven by more accessible credit and lower price points. In contrast, higher-end markets and investor cash flow are facing constraints due to serviceability limits and rising costs.

Looking ahead, while some support for housing values remains, there are significant headwinds facing demand, particularly in the areas of affordability, credit availability, and household confidence. Affordability issues are diverting demand towards lower-priced markets, as dwelling values remain high relative to household incomes. The recent interest rate hike has further reduced borrowing power and repayment capacity, intensifying serviceability pressures for prospective buyers. Additionally, weakening income growth and declining real purchasing power are likely to lead to more conservative purchasing behavior and cautious decision-making.

Despite these challenges, housing values are supported by persistent supply constraints across most markets. Annual credit growth for investor home lending is at its highest rate since 2015, prompting regulators to monitor this area closely for potential risks. While consumer sentiment has softened in recent months, weaker confidence levels may result in more conservative decision-making and prolonged purchasing timeframes.

Overall, the Australian housing market is experiencing a complex interplay of factors that are reshaping demand and influencing market dynamics. While mid-sized capitals are currently leading the way in terms of growth, the broader market is facing challenges that could impact future trends and outcomes.