The West powers ahead as Sydney and Melbourne stall in two-speed housing market

The Perth property market is in an unmitigated boom phase, while Sydney and Melbourne are flatlining.

In the west, there’s simply bare cupboards for those looking to buy a home or, as is increasingly the case, an investment property.

It’s a similar but slightly less dramatic picture in Brisbane and Adelaide.

The three mid-sized capitals are continuing a run of monthly price gains that has seen Brisbane’s median dwelling value approach $1.1 million, with Perth likely to crack the $1 million mark next month.

The key indicator highlighting the cause of this two-speed property market is advertised stock.

Cotality data released Monday (2 March) shows that in the four weeks to 22 February, Perth listings remained 48 per cent below their five-year average, with Brisbane 31 per cent below and Adelaide 23 per cent lower.

Advertised stock levels are also low in Sydney and Melbourne, but ‘only’ 1.0 per cent and 4.3 per cent down on five-year average levels respectively.

With more properties now hitting the market in the country’s two largest property markets, the trend shows no immediate sign of reversing.

Sydney and Melbourne have seen a clear pickup in new listings over the past month. Newly advertised stock is now 9.7 per cent above the five-year average in Sydney and almost 12 per cent higher than average in Melbourne.

Tim Lawless, Research Director, Cotality, said that while Sydney and Melbourne have traditionally led Australia’s housing cycles, there have also been periods where the market has moved in a counter-cyclical way.

“The clear slowdown in housing conditions across those cities could signal an easing in growth conditions elsewhere down the track, but for now, the mid-sized capitals continue to see support from extremely low inventory levels, which is boosting the growth in values.

“Vendors are looking more motivated in Sydney and Melbourne, possibly looking to beat a further softening in selling conditions as clearance rates ease and demand slows,” Mr Lawless said.

“If the typical seasonal pattern holds, the flow of new listings is likely to strengthen leading into Easter.”

And that should keep property price growth subdued.

Regional markets are outperforming the capitals across New South Wales, Victoria, South Australia and Tasmania, with demand more resilient thanks to lower price points and evidence of rising internal migration rates.

Who is driving Perth's property market?

In Western Australia, investors are also highly active. The state saw a sharp rise in the number of new home loans at the end of last year.

MBAWA CEO Matt Moran said first home buyers in WA made up 33.3 per cent of all owner occupier loans in the December 2025 quarter.

This compared to loans to investors that made up 41.0 per cent of lending for the purchase of an existing home in WA, while that cohort represented 30.8 per cent of lending for the purchase of a newly built home.

Mr Moran said Perth was facing a housing supply crisis.

“Compared to 2024, in the 12 months to December 2025 we only saw a negligible increase in the percentage of housing investor loans.

“While supply-side solutions such as increasing productivity, land supply and growing the building and construction workforce are critical to deliver WA’s National Housing Accord target of 129,700 new homes by 2029, demand from investors is also crucial.

“Demand from mum and dad investors helps build more homes which helps bring rents down.

“Major private investment is also vital to getting more medium and high-density projects off the ground; more supply means more options, and this will help deal with the sharp increase in property prices.”

Demand headwinds intensify

Demand-side pressures are becoming more apparent.

Affordability continues to weigh heavily on activity, pushing buyers towards lower-priced markets as dwelling values remain elevated relative to incomes.

The February rate rise has further reduced borrowing capacity, with average new loan sizes approaching $700,000 and serviceability buffers limiting access to credit, particularly at higher price points.

Mr Lawless said real income growth has slipped into negative territory once adjusted for inflation, constraining households’ ability to absorb higher repayments and encouraging more cautious purchasing decisions. Population growth has also normalised, removing a key tailwind that underpinned recent demand.

Credit settings have tightened at the margin. APRA’s 20 per cent cap on high debt-to-income lending is unlikely to shift headline outcomes, but more leveraged borrowers may find finance harder to secure.

Meanwhile, investor credit growth is running at its fastest pace since 2015, placing further attention on lending conditions. Softer consumer sentiment over recent months adds to the risk of slower decision-making and reduced willingness to stretch household balance sheets.

Supply constraints and offsets

Despite these headwinds, supply remains constrained across most capitals, limiting downside risk.

Although construction activity is lifting, overall dwelling supply continues to fall short of underlying demand, particularly in established markets.

There are early signs of improvement.

Building approvals and commencements are trending above decade averages in Western Australia, South Australia and Queensland, and new listings have risen in Sydney and Melbourne.

A tight labour market and targeted policy support, including the 5 per cent deposit guarantee, are helping to sustain demand.

Overall, conditions appear finely balanced, with modest price growth likely to be concentrated in more affordable segments through 2026.