This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- Australia's property market is split: Perth (+22% annual), Brisbane (+17.3%) and Adelaide are surging, while Sydney (-0.1% monthly) and Melbourne (-0.2%) are cooling.
- Perth has fewer than 5,000 active listings against a balanced-market benchmark of 12,000-13,000. Properties sell in an average of 9 days.
- Sydney mortgage repayments now consume 72% of household income, creating a hard affordability ceiling that is capping price growth.
- Rental yields in Perth and Brisbane (4-5.5% for houses) are nearly double Sydney's 2.6%, making cash-flow-positive investing far more achievable outside the two largest capitals.
- Investor lending has surged 31.8% year-on-year to a record $42.9 billion, with most activity concentrated in the mid-sized capitals.
This article is general information only and does not constitute financial, tax, or investment advice.
Australia does not have one property market. It has several, and right now they are moving in opposite directions. Perth, Brisbane and Adelaide are posting double-digit annual growth. Sydney and Melbourne are flat or going backwards. For investors, the gap between picking the right city and the wrong one has rarely been wider.
Here is what the latest March 2026 data from Cotality (formerly CoreLogic) shows, what is driving the divergence, and what it means if you own rental properties or are thinking about buying.
The Numbers: March 2026 Cotality Data
| City | Monthly | Quarterly | Annual | Median Value |
|---|---|---|---|---|
| Perth | +2.5% | +7.4% | +22.0% | $989,211 |
| Brisbane | +1.6% | +4.8% | +17.3% | $1,080,538 |
| Adelaide | +1.2% | +3.8% | n/a | $922,991 |
| Sydney | -0.1% | +0.1% | +6.0% | $1,296,039 |
| Melbourne | -0.2% | -0.3% | +4.7% | $826,132 |
The national median dwelling value sits at roughly $922,838. Perth is on track to crack $1 million by the end of 2026.
As Cotality's Tim Lawless put it: "The clear slowdown in housing conditions across Sydney and Melbourne could signal an easing in growth conditions elsewhere down the track."
Why Perth, Brisbane and Adelaide Are Surging
Three forces are converging in the mid-sized capitals.
Supply is critically low. Perth has roughly 5,000 active listings. A balanced market needs 12,000 to 13,000. That is a 48% shortfall against the five-year average. Brisbane listings are 31% below average. When there is simply not enough stock, prices go up.
Population growth is relentless. Perth is growing at 2.4% per year, absorbing 80,000-plus net new residents annually. Mining and resources investment (including the AUKUS submarine program and the Westport pipeline) is pulling workers to Western Australia. Brisbane's post-pandemic migration wave has not slowed, and Adelaide continues to attract families priced out of the eastern capitals.
Relative affordability still exists. Perth's median of $989K is 24% cheaper than Sydney's $1.3 million. Mortgage repayments in Perth consume 39.5% of household income, compared to a suffocating 72% in Sydney. There is headroom for prices to keep climbing before buyers hit the same wall.
KPMG's Dr Brendan Rynne noted: "Perth continues to record the fastest population growth in the country and limited housing supply is keeping upward pressure on prices."
Properties in Perth sell in an average of 9 days. The national average is 28.
Why Sydney and Melbourne Are Stalling
The two largest capitals face a different set of forces.
Affordability has hit a ceiling. In Sydney, mortgage repayments eat 72% of household income. That is not sustainable, and it means buyer pools are shrinking. Melbourne is better at around 47%, but still stretched enough to dampen competition.
Listings are flooding the market. New listings in Sydney are 9.7% above the five-year average. Melbourne is 11.9% above. More choice for buyers means less urgency, lower auction clearance rates (60.9%, below the decade average of 64%), and slower price growth.
Rate sensitivity is higher. Larger loan sizes in Sydney and Melbourne mean even modest rate changes have an outsized impact on repayments. If you are weighing up how rate movements affect your mortgage, our mortgage repayment calculator can show you the exact dollar impact.
CBA economists summed it up: "The mid-sized capital cities are forecast to continue to outperform Sydney and Melbourne this year, with the gap most pronounced in Perth and Brisbane."
What the Banks Are Forecasting for 2026
| Forecaster | Perth | Brisbane | Adelaide | Sydney | Melbourne |
|---|---|---|---|---|---|
| CBA | +15% | +12% | +9% | +2% | +1% |
| Westpac | +8% | +7% | +6% | +3% | +4% |
| SQM (revised) | +7% to +13% | +7% to +13% | +7% to +13% | -1% to -6% | -1% to -6% |
| KPMG (national) | +7.7% nationally |
SQM's Louis Christopher recently revised his base case, flipping Sydney and Melbourne into potentially negative territory for 2026. That is a meaningful shift from a forecaster who was previously more optimistic about the big two capitals.
Rental Yields: Where the Cash Flow Is
For investors focused on cash flow rather than pure capital growth, the yield gap between cities is just as important as the price gap.
| City | Houses (Gross) | Units (Gross) |
|---|---|---|
| Darwin | 5.8% | 7.5% |
| Perth | 4-5.5% | 5%+ |
| Brisbane | 4-5% | 5%+ |
| Adelaide | 4-5% | 5%+ |
| Melbourne | 2.95% | 4.38% |
| Sydney | 2.6% | 3.9% |
Perth and Brisbane are delivering yields nearly double what Sydney offers for houses. Combined with the national vacancy rate sitting at 1.5-1.6%, rental demand remains strong almost everywhere.
If you are comparing potential properties, our best rental yield suburbs breakdown goes deeper into suburb-level data across every state.
Calculate Your Rental Yield
Plug in the numbers for any property you are considering to see how the gross and net yield stacks up.
Enter your purchase price and weekly rent to calculate rental yield.
The Investor Lending Surge
Investors are not sitting on the sidelines watching this play out. They are acting on it.
Investor lending surged 31.8% year-on-year to a record $42.9 billion in Q4 2025. That quarter saw 60,455 new investment loans, a 23% increase and the highest on record. Investor loans now make up 39.7% of total mortgage lending, the highest share since 2017.
The average investor loan nationally is $717,000, ranging from $644,000 in WA to $873,000 in NSW.
What is driving it? Tight rental markets, strong yields in the mid-sized capitals, and the looming possibility of negative gearing changes after the May 2026 Budget. Many investors appear to be locking in purchases under the current rules before any reforms take effect.
If you already own investment properties, it is worth understanding how negative gearing affects your tax position, especially if the rules change.
What This Means for Property Investors
The two-speed market creates both opportunities and traps. Here is what to consider.
If you are buying in Perth, Brisbane or Adelaide: You are entering markets with strong fundamentals but rising entry prices. Run the numbers carefully. A property that was positively geared at $650,000 might not be at $850,000. Make sure your rental income covers enough of your costs to be sustainable, even if rates stay elevated.
If you hold in Sydney or Melbourne: Do not panic. Flat or slightly negative growth is not a crash. If your properties are generating solid rental income and you can service the debt comfortably, sitting tight is a perfectly reasonable strategy. If you are negatively geared, understand exactly what you can claim at tax time to offset the cash flow gap.
If you are buying your first investment property: The first investment property checklist covers the fundamentals. Pay close attention to the city you choose. Right now, the difference between a 2.6% yield in Sydney and a 5% yield in Perth is the difference between negative and positive cash flow from day one.
Keep an eye on the May 2026 Budget. Potential changes to negative gearing and the capital gains tax discount could reshape investor calculations. Nothing is legislated yet, but being prepared matters.
Whatever market you are in, tracking your actual income, expenses and yields across properties gives you the clearest picture of how your portfolio is really performing. propkt helps you do exactly that, from transaction tracking to tax-time summaries, so you always know whether each property is making or losing money.
Frequently Asked Questions
Is Perth property still a good investment in 2026?
Perth has posted 22% annual growth to March 2026 and yields remain between 4% and 5.5% for houses. Supply is extremely tight, with active listings 48% below the five-year average. However, entry prices have jumped significantly, so your numbers need to stack up at current prices, not last year's.
Why are Sydney and Melbourne property prices falling?
Both cities face an affordability ceiling. Mortgage repayments consume 72% of household income in Sydney and around 47% in Melbourne. Listings are flooding the market, sitting well above five-year averages, which gives buyers more bargaining power and reduces competition.
Which Australian city has the best rental yield in 2026?
Darwin leads on gross yield at 5.8% for houses and 7.5% for units. Among the larger capitals, Perth (4-5.5%) and Brisbane (4-5%) significantly outperform Sydney (2.6% for houses) and Melbourne (2.95% for houses).
Will negative gearing changes affect the property market in 2026?
Treasury is modelling reforms ahead of the May 2026 Budget, including capping negative gearing at two properties per investor and reducing the CGT discount from 50% to 33%. No legislation has passed yet. Many investors appear to be buying ahead of any potential changes.
What are the major banks forecasting for Australian property prices in 2026?
Forecasts vary by city. CBA expects Perth to grow 15% and Brisbane 12%, but Sydney only 2% and Melbourne 1%. SQM Research has revised its base case to show Sydney and Melbourne potentially declining by up to 6%, while Perth, Brisbane and Adelaide could rise 7-13%.