Melbourne, Sydney fall behind other cities in key property growth measures

If you bought an apartment in Perth 12 months ago, your investment would likely have soared more than 20 per cent, whereas the same purchase in Australia’s two largest property markets would’ve lost money once inflation was factored in.

Dwelling values in Sydney and Melbourne have also lagged well behind the likes of Perth, Adelaide and Brisbane over the past 12 months and prospective buyers are clearly paying attention.

Newly released data measuring buyer interest (based on average enquiries made each quarter by our more than 130,000 users) has shown New South Wales and Victoria falling behind other states when it comes to buyer demand.

The OpenLot New House Enquiry Index findings revealed Queensland stood out as the national leader in both growth and total demand.

Qi Chen, CEO and Founder of OpenLot.com.au, said national growth has stalled, dipping by 1.3 per cent year-on-year.

“Both Victoria and New South Wales are falling behind, with both states showing signs of a potential softening.

“That’s a trend we will watch over the next two quarters.”

Mr Chen said demand remains well above historic norms and sits at the third-highest level recorded.

“The growth in enquiries per user and total buyer enquiries in Queensland is driven by a shortage of land, so buyers have to work harder to find what they are looking for.

“We expect more land to become available in Queensland in the second half of 2025.

“Western Australia and South Australia are lagging significantly behind the other states, with both experiencing double-digit drops in buyer interest in the first quarter compared to 2024.”

The great apartment divide

Over the past 12 months, median dwelling values have fallen 1.2 per cent in Melbourne and risen just 1.1 per cent in Sydney, compared to the inflation rate of 2.4 per cent.

Adelaide and Perth property prices rose by 8.6 per cent in that time, according to Cotality, while Brisbane capital growth came in at 7.1 per cent.

The divergence in fortunes between the biggest and mid-sized capitals is playing out most dramatically in the apartment market.

JLL’s latest Australian Residential Dynamics report revealed Perth and Brisbane were surging ahead while Melbourne lags, creating a two-speed apartment market across the nation.

The Q1 2025 analysis paints a stark picture of market contrasts where Perth’s apartment values have rocketed 22.4 per cent year-on-year to reach $520,000, while Melbourne’s market has contracted by 0.3 per cent over the same period, with median unit prices at $615,000. 

“What we’re witnessing is a fundamental reshaping of Australia’s apartment markets driven by persistent supply constraints,” said Bill Fatouros, JLL’s Head of Residential Development Valuations.

“Despite strong demand signals, construction challenges continue to limit new supply across all major markets.”

Sydney, Australia’s largest apartment market, holds middle ground in this race with more moderate growth of 2.6 per cent year-on-year.

Despite representing the nation’s most expensive apartment market, Sydney faces its own challenges with completions expected to decline by 13.0 per cent in 2025 compared to 2024. 

Adelaide has emerged as a surprise contender in this apartment market race, recording the highest rental growth in the nation at 13.0 per cent year-on-year despite being Australia's smallest apartment market. The South Australian capital also posted strong capital growth of 15.7 per cent, bringing median unit prices to $565,000, as supply normalises to pre-Covid-19 levels.

Brisbane has matched Perth’s strong performance with apartment values rising 20.2 per cent year-on-year to $625,000, putting both cities well ahead in the nationwide apartment market competition.

No reprieve for renters 

While Melbourne and Sydney apartment prices might be struggling, renters continue to get hit hard.

Many renters choose apartments due to high property prices and market entry costs but they are finding no respite from rental hikes.

Apartment rents rose 7.7 per cent year-on-year in Sydney and 8.9 per cent in Melbourne, according to JLL.

Report author Ahmed Almihdar said the median Sydney unit price has increased 2.6 per cent year-on-year to $800,000, while two-bedroom unit rents have risen to $700 per week.

“Supply constraints and growing demand are expected to continue to exert upward pressure on both rents and property prices, however, affordability constraints are likely to temper the pace of growth.

“Further, the ongoing affordability issue in capital cities, where detached house prices have become prohibitive for many, is expected to drive demand to more affordable housing options, particularly units, as they offer lower entry points for homeownership, which may see the pace of growth for apartment rents and prices moderately outpace detached houses.”

Price growth convergence

National home prices rose 0.39 per cent in May, according to PropTrack, marking the fifth consecutive month of growth and a new record high for Australian home values. With interest rates falling, price momentum has increased and broadened, with all capitals seeing prices lift in May.

Australia’s largest cities may narrow the capital growth gap with the other mainland capitals in the coming months, according to Eleanor Creagh, REA Group Senior Economist.

“Price growth across the capitals is starting to converge.

“Melbourne, which previously lagged the other capitals, is now seeing home price growth pick up.

“Cities such as Perth and Brisbane are now seeing growth moderate after strong outperformance.

“The growth seen in all capital cities is underpinned by improved buyer sentiment and renewed confidence following interest rate cuts,” Ms Creagh said.

Where Sydney’s property market is excelling compared to other major cities is at the top end of the real estate market.

Across the state capitals, Sydney and Canberra are the only cities where the upper quartile is showing a stronger quarterly growth trend than the lower quartile of the market.

Sydney agency Rose and Jones noted in its latest monthly market report that there was strong demand from high-net-worth clients seeking premium properties in tightly held Sydney suburbs.

“Sydney’s prime property market is likely to remain undersupplied throughout the second half of 2025.

“With affordability constraints curbing some of the middle-market movement, prestige and downsizer-driven segments continue to lead the way, with limited quality stock available, particularly in the $3 million-plus segment.

“There is also strong overseas interest from expats and long-term investors,” the report noted.