Australia’s housing market is splitting in early 2026, with cheaper homes and mid-sized capitals powering ahead while Sydney and Melbourne lose momentum.
The fiercest action is at the bottom of the price ladder.
“There is a lot of competition for lower-priced properties,” said Tim Lawless (pictured), research director at Cotality. “First-home buyers, investors, and subsequent buyers are all competing across this sector of the market, while credit is less available across the higher price points due to serviceability constraints.”
This comes as regional buyers are chasing value, with Perth and the mid-sized capitals continuing to outpace a stalling Sydney–Melbourne market ahead of Easter.
Perth is the clear frontrunner, with February home values jumping 2.3% and adding more than $22,500 to the median dwelling value in a single month. Brisbane, Adelaide, and Hobart each posted more than 1% growth, reinforcing the appeal of relatively affordable cities where buyers face intense competition and very little stock.
The picture is strikingly different in the nation’s largest capitals. Sydney and Melbourne have been “less resilient to the February rate hike and the drop in sentiment,” leaving values flat for the month and slightly negative over the rolling quarter at -0.1% and -0.4% respectively. Lawless noted that while the two cities have traditionally steered Australia’s housing cycle, “there have also been periods where the market has moved in a counter cyclical way.”
Supply is a key dividing line. Over the four weeks to 22 February, listings in Perth were 48% below their five‑year average, with Brisbane 31% under and Adelaide 23% lower. The squeeze is far less severe in Sydney and Melbourne, where overall stock is only marginally below average and new listings are rising.
Freshly advertised properties surged through February, with new stock sitting 9.7% above the five‑year average in Sydney and almost 12% higher in Melbourne.
“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,” Lawless said.
Regional markets are also cementing their lead over the capitals. Cotality’s recent data show regional dwelling values rose 3.2% in the three months to January, ahead of the 2.1% gain across combined capital cities, as households grapple with higher rates, tight rental conditions and limited listings. Western Australia is the standout, with regional WA values up 6.1% over the quarter and hotspots such as Albany, Kalgoorlie‑Boulder, and Busselton leading the charge.
“Affordability remains a powerful driver of buyer behaviour,” Cotality’s head of research, Gerard Burg, said. Burg added that many households are shifting to regional areas “where buyers’ budgets stretch further and competition for available homes is strong.”
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