What does Australia’s two-speed property market mean for investors?

Consumer confidence might be plumbing record lows but Australia’s residential property sector has smashed through multiple price milestones.

Complicating that picture is the fact the national story is no longer uniform.

Perth posted the standout February gain of 2.3 per cent, lifting its median to $989,211 and delivering a staggering 22.0 per cent annual surge – the highest of any capital. Brisbane followed with 1.6 per cent monthly and 17.3 per cent annual ($1,080,538 median), while Adelaide added 1.3 per cent monthly and 10.9 per cent annual. Hobart and Darwin also shone, with Darwin at 19.4 per cent annual growth.

Low inventory is the decisive driver in the outperforming markets.

Cotality notes advertised stock in Perth remains extremely tight, with listings well below five-year averages (some reports cite 30-48 per cent below in hotspots like Perth and Darwin).

In Brisbane and Adelaide, the same dynamic is playing out. Meanwhile, Sydney and Melbourne have seen a noticeable pickup in new listings – 9.7 per cent and nearly 12 per cent above five-year averages respectively – prompting vendors to become more realistic and cooling the upper end of the market.

Lower-quartile houses across capitals rose 11.5 per cent annually versus just 6.6 per cent for the upper quartile, confirming first home buyers and investors are battling hardest for entry-level stock.

PropTrack’s latest report shows capital-city medians cracking the $1 million barrier for the first time ($1,004,000), while the national median sits at $897,000 after a 0.5 per cent monthly lift, adding roughly $90,000 to the typical home over the past year.

In sharp contrast, Sydney and Melbourne, the traditional heavyweights, are showing clear signs of fatigue. Sydney values were marginally down 0.1 per cent over the rolling quarter (median $1,296,039, 6.0 per cent annual) and remain 0.1 per cent below their November 2025 peak.

Melbourne slipped 0.4 per cent over the quarter (median $826,132, 4.7 per cent annual) and sits 1 per cent below its March 2022 high. Over the quarter to end-February, combined capitals grew a modest 1.8 per cent, while regionals powered ahead at 3.2 per cent.

Middle East chaos or calm?

The ANZ-Roy Morgan Consumer Confidence rating, released Tuesday (24 March), was down 5.4 points to 63.1 this week, driven by falling confidence about personal finances. This is a record low level for Consumer Confidence in the index stretching back more than 50 years since 1972.

That measure emerged after the February RBA rate hike (25 bps), an increase that also clearly stung the bigger cities’ real estate market more than the mid-sized ones still grappling with chronic undersupply.

PropTrack’s senior economist Eleanor Creagh noted: “The strongest conditions remain concentrated where buyer demand is facing into tight supply, with limited new housing supply providing a floor under prices.”

Yet she flagged slower, more uneven growth ahead in 2026 as affordability constraints and potential further rate rises bite.

But no projections about the real estate market are currently complete without one eye being turned to developments on the other side of the world.

Louise Kavanagh, Chief Investment Officer and Head of Asia Pacific Real Estate at Nuveen, said the uncertainty over the duration and outcome of the war with Iran will overshadow on the near-term economic outlook for all of the Asia Pacific region.

She said higher global oil prices will worsen trade balances, intensify inflationary pressures and complicate regional central banks’ future monetary policy paths but predicted the property market would hold up relatively well.

“It is too early to foretell the longer-term impact on the regional property market due to the uncertainty and duration of the war but over the near-term, however, the outlook remains relatively well-underpinned.

“Real estate fundamentals have stayed quite sturdy over the past few years through the pandemic: rising ecommerce penetration, shallower interest rate increases, higher concentration of long-term domestic ownership and better supply/demand fundamentals.

“Improving domestic demand has also helped underpinned occupier dynamics, underpinning income and valuation especially for many of the resilient sectors backed by structural megatrends such multifamily, senior housing, student accommodation for instance.

“Should the conflict prolong, undoubtedly business and consumer sentiment will take a hit from weaker growth, dampening demand across some traditional property sectors as occupier take-up weakens,” Ms Kavanagh said.

A nation’s wealth built on property

The broader wealth metrics are eye-watering.

Propertyupdate.com.au revealed Australia’s residential real estate is now worth $12.5 trillion, with only $2.5 trillion in outstanding mortgages – a comfortable 20 per cent loan-to-value ratio across the entire stock.

Residential property still comprises 55.4 per cent of total household wealth.

Rental markets remain tight. National median weekly rent hit $681 (Q4 2025 data) with 5.2 per cent annual growth and a vacancy rate of just 1.7 per cent. Perth’s gross yield sits at 3.8 per cent, Brisbane 3.3 per cent, Adelaide 3.4 per cent – all far healthier than Sydney’s 3.0 per cent. Units are increasingly the investor’s cashflow play; PropTrack reports unit growth now outpacing houses on a quarterly basis in most capitals as buyers chase affordability.

On the supply front, ABS data showed total dwelling approvals fell 7.2 per cent in January to 14,564, with apartments and townhouses dropping 24.5 per cent. This follows a volatile 2025 that still ended above prior years but underscores the chronic shortfall against the National Housing Accord targets.

Maree Kilroy, Lead Economist for Oxford Economics Australia, said housing demand was not going away any time soon.

“We still see considerable pent-up demand for housing, with an estimated undersupply of about 150,000 homes.

“Combined with a Housing Accord policy tailwind, this will be enough to sustain a continued upswing in residential construction.

“We forecast annual total dwelling approvals to trend above 240,000 by the end of the decade, although global instability represents a growing downside risk to this outlook.”

What this means for investors right now

Perth, Brisbane and Adelaide continue to reward buyers who can move quickly on houses or units in undersupplied suburbs.

With investor lending up 31.8 per cent year-on-year and sales volumes rising, the window for well-researched acquisitions remains open, particularly in Western Australia, Queensland and South Australia.

After modest growth in 2025, apartment rents have grown at a brisk pace in 2026 and median rents are expected to grow by 27 per cent between 2025-2030 across 53 precincts in Australian capital cities, a new CBRE report shows.

CBRE’s Apartment Vacancy, Rent and Price Outlook H1 2026 report notes this forecast growth follows the 51% increase in median apartment rents over the previous decade.

The report forecasts that by 2030 around 83 per cent of two-bed apartments will have rents exceeding $700 per week with 36 per cent exceeding $1000 per week.

CBRE’s Pacific Head of Research Sameer Chopra notes CBRE’s rent forecasts have been increased following changes to market conditions.

“We see growing evidence of circa 30 per cent premium of capital values and rents for newer vintage stock,” he said.

“CBRE estimate the next three years should see investment returns for apartments in Sydney and Melbourne outpace historic levels.

“The Gold Coast and Perth market should see the highest total returns, in our view,” Mr Chopra added.

Regional markets have outgrown capitals both annually (10.5 per cent vs 8.6 per cent) and over five years (59 per cent vs 41 per cent), offering lifestyle and price advantages.

Investors chasing yield should note Darwin’s 6.1 per cent gross yield, and Perth’s still solid 3.8 per cent with vacancy at 1.3 per cent.

Sydney and Melbourne investors may need to pivot toward units or lower-quartile assets, or simply hold and wait for the next policy-driven demand wave, due to the expanded Home Guarantee Scheme and any future rate easing.

The expanded first home buyer incentives flagged in Domain’s earlier 2026 forecasts are already pulling forward demand and supporting the lower end.

The bottom line is that Australia’s $12.5 trillion property engine is still firing, but the cylinders are working at very different speeds.

Investor capital is demonstrably flowing to tight-supply, high-growth corridors while the mega-capitals consolidate.