Australia's Two-Speed Property Market: Which Cities Are Surging and Which Are Slowing

Australia's property market has split into two distinct lanes. On one side, mid-sized capitals like Brisbane, Perth, and Adelaide are delivering double-digit annual price growth, fuelled by interstate migration, low stock, and relative affordability. On the other, Sydney and Melbourne are growing at a fraction of the pace, weighed down by stretched affordability and higher inventory. National dwelling values are up 9.5% over the past year, but that headline number masks a growing divergence that matters enormously for buyers and investors.

The Numbers: City-by-City Performance

The latest data from CoreLogic/Cotality and SQM Research paints a stark picture of how differently each capital is performing:

The gap is striking: Brisbane and Perth are growing at three times the rate of Sydney and Melbourne. In dollar terms, Brisbane house asking prices have jumped over 20% year-on-year to $1,434,651, while Perth units have surged 28% to $779,354.

What's Driving the Surge Cities?

Three factors explain why Brisbane, Perth, and Adelaide are outperforming:

Why Sydney and Melbourne Are Slowing

Sydney and Melbourne aren't declining — they're still growing, just at a much slower pace. The reasons are largely the flip side of what's driving the surge cities:

• Affordability ceiling: With Sydney's median house asking price at $2.2M (+11.4% YoY), many buyers simply can't afford to enter. The rate hike to 3.85% compounds this.
• Higher inventory: Listing volumes in Sydney and Melbourne are closer to normal levels, giving buyers more choice and reducing competitive pressure.
• Investor rotation: As covered in our investor shift article, Victoria is attracting renewed investor interest, but this is a recovery from a low base rather than a surge.

Melbourne in particular represents a different story. While headline growth is modest at 5.4%, the price reset of recent years means units are now significantly better value. Melbourne unit asking prices are $680,713 — barely a third of Sydney house prices — and investors are starting to take notice.

Units Outperforming Houses in the Surge Cities

One of the most notable trends is how dramatically units are outpacing houses in the high-growth capitals:

This shift reflects buyers migrating toward more affordable property types as house prices push beyond reach. Perth units are up 28% year-on-year — the strongest unit growth in the country — yet the median asking price of $779,354 remains accessible compared to houses at $1.22M.

What Happens Next? The Second Half Rotation

Most analysts expect the two-speed pattern to start narrowing in the second half of 2026. Domain forecasts growth in two phases:

• First half 2026: Brisbane, Perth, and Adelaide continue to lead, driven by tight supply and first-home buyer stimulus
• Second half 2026: Affordability constraints in the surge cities slow their growth, while Sydney and Melbourne pick up as relative value improves

Shane Oliver agrees: "Expect strength to shift toward Melbourne, Sydney, and other laggards as relative affordability deteriorates in boom cities." This rotation pattern is typical of Australian property cycles — the markets that run hardest eventually cool, and capital rotates toward wherever value appears.

What This Means for Buyers

• Sydney buyers: The slower growth is actually an advantage — you have more stock to choose from, less competition at auctions, and time to make decisions. If you can get in now before the expected second-half pickup, you may benefit from the rotation.
• Interstate buyers: If you're considering Brisbane, Perth, or Adelaide, move quickly but don't overpay. These markets are expected to moderate in the second half as affordability caps bite.
• Investors: Melbourne units offer compelling value right now, with strong unit price growth (+10.7%) and some of the highest rental yields among major capitals. The investor rotation into Victoria is backed by ABS lending data.
• First home buyers: Units in almost every capital are growing faster than houses and remain far more affordable. Don't dismiss an apartment as a stepping stone — in this market, it could be your smartest entry point.

The Bottom Line

Australia doesn't have one property market — it has eight very different ones. The 9.5% national growth figure masks a huge range from Brisbane's 16.5% to Melbourne's 5.4%. Understanding which lane your city is in matters enormously for timing, strategy, and expectations. The current divergence won't last forever — analysts expect it to narrow by late 2026 — but right now, the gap between surge cities and slow cities is as wide as it's been in years.

Sources: CoreLogic/Cotality; SQM Research; PropertyUpdate; ANZ February Housing Outlook; AMP Capital (Shane Oliver); Domain; API Magazine