Home Value Growth Slows Across Australia as Sydney and Melbourne Decline

Sydney and Melbourne Lead the Downturn

Sydney and Melbourne were the weakest-performing capital cities in April, with both markets recording a monthly decline of 0.6%. Sydney home values are now 1.0% below their November 2025 peak, while Melbourne values sit 1.9% below their cyclical peak and 2.3% beneath the March 2022 high.

• 0.6% monthly decline in both Sydney and Melbourne.
• 1.0% fall in Sydney home values from the November 2025 peak.
• 2.3% gap between Melbourne values and the March 2022 high.

The slowdown reflects worsening affordability pressures, reduced borrowing capacity, and softer buyer sentiment. Cotality research director Tim Lawless noted that housing demand had already begun weakening before recent interest rate increases and geopolitical uncertainty further impacted confidence.

Source: Cotality Australia – Monthly Home Value Index, May 2026

Mid-Sized Capitals Continue to Outperform

Despite the broader slowdown, several mid-sized capital cities continue to record strong growth. Perth remained Australia’s strongest-performing capital city in April, with dwelling values rising 2.1% over the month and 26.0% annually, pushing the median dwelling value above $1.03 million.

• 2.1% monthly growth in Perth dwelling values.
• 26.0% annual growth in Perth dwelling values.
• 1.3%, 1.2%, and 1.1% monthly growth in Darwin, Brisbane, and Adelaide respectively.

Brisbane and Darwin also posted strong monthly growth of 1.2% and 1.3% respectively, while Adelaide increased 1.1%. However, momentum is clearly moderating, with every capital city recording a slower pace of growth in April compared with previous months, suggesting the national market is entering a more balanced phase.

Source: Cotality Australia – Monthly Home Value Index, May 2026

Buyer Demand Softens as Listings Rise

Housing demand has weakened noticeably across the major capitals. Estimated capital city home sales over the past three months were 5.4% lower than a year earlier and 7.4% below the previous five-year average.

• 5.4% annual decline in estimated capital city home sales over the past three months.
• 9.4% higher-than-average advertised stock levels in Sydney.
• Below 55% auction clearance rates since late March.

At the same time, advertised stock levels are increasing, particularly in Sydney and Melbourne. Listings in Sydney are now 9.4% above the five-year average, while Melbourne inventory sits 2.2% above average. Auction clearance rates have also remained below 55% since late March, signalling softer selling conditions and growing buyer caution.

Cotality noted that rising inflation, higher interest rates, and geopolitical uncertainty are weighing heavily on consumer confidence and borrowing capacity. Financial markets are currently pricing in at least two additional rate hikes during 2026.

Source: Cotality Australia – Monthly Home Value Index, May 2026

Lower-Priced Housing Segments Show Greater Resilience

One of the strongest trends emerging in 2026 is the outperformance of lower-priced housing segments. Across every capital city, lower quartile dwelling values are recording stronger growth than premium markets, as buyers concentrate on more affordable properties.

• 2.9% year-to-date growth in Sydney lower-tier house values.
• 3.3% year-to-date fall across Sydney’s most expensive quarter of the market.
• Lower quartile dwelling values are outperforming premium segments across every capital city.

Sydney presents the clearest example of this divergence. Lower-tier house values in Sydney have risen 2.9% year-to-date, while values across the most expensive quarter of the market have fallen 3.3%. This trend reflects tighter lending conditions and increased reliance on first-home buyer incentives, pushing demand toward more affordable suburbs, outer metropolitan areas, and units.

Sources: Cotality Australia – Monthly Home Value Index, May 2026; First Home Buyer Scheme Market Analysis

Regional Markets Continue to Outperform Capitals

Regional Australia remains comparatively resilient amid the broader market slowdown. Over the first four months of 2026, combined regional dwelling values increased 4.2%, significantly outperforming the combined capitals, which rose only 1.8%.

• 4.2% growth in combined regional dwelling values over the first four months of 2026.
• 1.8% growth in combined capital city dwelling values over the same period.
• No regional SA4 sub-market recorded a decline in dwelling values during the first four months of the year.

Western Australia and Queensland regional markets continue to lead the country. Bunbury recorded one of the strongest regional performances nationally, while Queensland’s Darling Downs–Maranoa and NSW’s Far West & Orana also posted substantial growth. Importantly, no regional SA4 sub-market recorded a decline in dwelling values during the first four months of the year, highlighting the ongoing strength of affordable regional markets.

Source: Cotality Australia – Monthly Home Value Index, May 2026

Rental Markets Remain Extremely Tight

Rental market conditions remain highly constrained nationwide. Australia’s vacancy rate held at just 1.6% in April, significantly below the long-term average of 3.3%.

• 1.6% national vacancy rate in April.
• 5.7% annual increase in national rents.
• 9.8% annual increase in Darwin unit rents.

National rents increased another 0.6% over the month and are now 5.7% higher annually, adding approximately $38 per week to the median rent. Sydney remains the country’s most expensive rental market, with median house rents reaching $869 per week.

Darwin continues to lead rental growth nationally, with house rents increasing 8.8% annually and unit rents rising 9.8%.

Source: Cotality Australia – Monthly Home Value Index, May 2026

Outlook

Australia’s housing market is transitioning from rapid growth into a slower, more fragmented environment. Affordability constraints, rising borrowing costs, weaker sentiment, and geopolitical uncertainty are reducing buyer demand, particularly in higher-priced markets.

However, ongoing supply constraints, new construction undershooting underlying demand, and tight labour market conditions are expected to provide some support to dwelling values and help prevent a sharp nationwide correction.

As 2026 progresses, market performance is likely to remain highly uneven across cities, price points, and regions. Lower-priced housing segments and regional markets are expected to continue outperforming premium metropolitan areas as buyers increasingly prioritise affordability and borrowing capacity.

Sources: Cotality Australia – Monthly Home Value Index, May 2026; ABS – Lending Indicators