Affordability strain, stretched serviceability requirements and rising living costs in Australia’s two largest capitals are driving a pronounced ‘K-shaped’ shift in housing conditions, with Sydney and Melbourne losing short-term momentum while Perth, Adelaide and Brisbane continue to rise.
Cotality’s December Monthly Chart Pack shows the rolling 28-day trend in dwelling values lifting more than 1% across the mid-sized capitals as growth in the largest cities trend close to zero, highlighting how diverse the cycle is across markets.
Cotality Economist Kaytlin Ezzy said affordability, which hit a record low this year, continues to shape much of the variation in performance across the capitals.
“Affordability challenges and supply constraints are not new issues, but they are influencing the pace of growth across both capital cities and regional centres,” she said.
“Perth, Adelaide and to a lesser extent Brisbane, while at record high prices, still offer comparatively accessible entry points amid low levels of advertised supply, which is helping to maintain upward pressure on values.”
“Sydney and to a lesser extent, Melbourne, are navigating higher living costs, tighter borrowing assessments, moderating buyer demand, along with a lift in newly advertised stock levels compared to this time last year, and the short-term slowdown in growth is consistent with those conditions.”
Momentum in Sydney and Melbourne is also being weighed down by softer auction market results, with clearance rates now holding below decade-long averages after surging to their highest point in two years in September.
Ms Ezzy said despite the RBA’s decision this week to keep rates on hold, low supply levels and first home buyer incentives, which are drawing more demand into the lower end of the market, are likely to keep some upward pressure on prices in 2026.
“If interest rates stay where they are for a while, the pace of buying is likely to ease from what we saw earlier in the year,” she said.
“Gains in home values have already surpassed the increases in borrowing capacity provided by this year’s rate cuts, and a more cautious interest rate outlook is likely to weigh on confidence. That combination can slow activity, even when supply is tight. Moving into the new year, more affordable homes are expected to remain the strongest part of the market because most buyers are working within strict affordability and serviceability limits.”
“Competition between first home buyers and investors has already pushed up values at the lower end. By contrast, growth at the upper end in Sydney and Melbourne is starting to flatten as buyers shift their attention towards more affordable options.”
Other highlights from December Housing Chart Pack include:
- Australia’s residential real estate total market value rose to $12.2 trillion in November.
- National dwelling values rose 3.1% over the quarter and 7.5% annually, adding an estimated $61,690 to the median Australian dwelling value.
- As of December 10th, rolling 28-day growth shows Perth, Adelaide and Brisbane lifting between 1.7% and 2.2%, while Sydney and Melbourne growth has slowed to 0.1% and 0.2%.
- Cotality estimates that more than 550,000 sales have transacted in the year to November, a 3.3% increase on the same time last year and 5.5% higher than the five-year average.
- Median time on market rose to 27 days nationally, with capital city homes selling fastest in Perth (nine days) and slowest in Canberra (36 days) and Darwin (37 days).
- While new listings have trended roughly in line with historic averages since mid-September, total advertised stock nationally is 14.0% lower than a year ago and remains 18.3% below the five-year spring average.
- New listings in Hobart, Sydney and Melbourne are up 18.4%, 11.9% and 11.2% respectively compared to this time last year, while Perth’s flow of newly advertised supply saw a 20.9% decline (page 24).
- National annual rent growth shifted higher for the sixth consecutive month to 5.0%, with most capitals recording an acceleration across the second half of the year.
- Auction clearance rates eased to a four-week average of 63.2%, down from 70.0% in September, with Sydney and Melbourne moving below decade-long averages. With auction clearance rates a real-time indicator of demand, this easing could translate into a cooling of growth trends.
