Australia’s housing market is reshuffling, as a new hierarchy of the nation’s most valuable cities takes shape.
"There's a real changing of the guard across the markets," Tim Lawless, executive research director Asia–Pacific at Cotality, the company formerly known as CoreLogic, said during a conversation with Tony MacRae, chief commercial officer at Bluestone Home Loans.
"There's been such a radical difference in the growth outcomes across each of the housing markets," Lawless said. "The wash up of the last five-year trend is that there's been a real reshuffling of values across the markets. And a lot of that growth has been very much centered around what you might describe as more affordable areas of each of these [capital city] markets."
Several forces are contributing to this transformation. A combination of falling interest rates, stabilizing inflation and easing population growth has supported sentiment and boosted transaction volumes. However, the market continues to face hurdles in the form of rising prices, a lack of housing, labour shortages and global uncertainty.
"There are so many moving parts out there," Lawless said. "We've got rates coming down; inflation is back in the target zone. But we've also got these headwinds around global uncertainty, Liberation Day [tariffs], and now we're seeing a lot more in the way of conflict in the Middle East. So I think there is certainly some complexity under the surface.
“There’s still some barriers in front of us. One is simply affordability,” he continued.
Even with interest rates coming down, the serviceability ratio — or the share of income needed to service a new mortgage — remains around 40%. That’s “still a pretty high serviceability ratio,” Lawless said. “If you’re on a medium income, you’re probably looking round that lower quartile of the market, which is where you’ll be able to access credit.”
The result has been markets like Perth, Adelaide and parts of Queensland have been growing rapidly in the last 12 months, with rising property values and a wave of new residents chasing affordability. Many of these cities are now outpacing traditional heavyweights like Melbourne in median home values — a seismic shift with major implications for brokers, lenders and investors.
“Over the medium term, there's been such a radical difference in the growth outcomes across each of the housing markets,” Lawless said. "You've still got Sydney standing out as an extreme premium above all the other capitals."
Meanwhile, the affordability ladder is being reordered across Australia’s capital cities.
"As rates have come down, it's created this positive inflection for the housing markets," Lawless said. "The midsize capitals are slowing down a little bit. Some of the softer markets, like Melbourne and Hobart, are moving back into growth.
"You have Melbourne, on the back of such a weak growth run," he continued. "Now the only cities that are more affordable — at least on a medium value term than Melbourne — are Hobart and Darwin. Brisbane has the second highest median value. And Adelaide and Perth ….we haven't seen those two cities tracking above Melbourne in their median value since forever. Darwin seems to be running its own race: an extraordinarily affordable market that has very high investment yields. It does seem to be becoming more attractive to investors."
He added that there’s nuance in cities like Perth, Adelaide and Brisbane, which appear to be surging. Many are now losing momentum as pricing accessibility tightens and demand cools. “That's on the back of things like just affordability becoming more challenging, [and] their interstate migration has slowed in those markets," Lawless said.
Australia’s housing market reshuffle signals a broader shift: price growth is becoming more consistent. Values are still rising across the country, but the pace has moderated, with many capital cities returning to positive territory, and without the sharp upswings seen in recent years.
The gap between the strongest and weakest performers has narrowed from a 26-point spread last August — when Perth led and Hobart lagged — to just 10% in 2025, the tightest range seen since early 2021.
“There’s definitely more uniformity in the market trends now,” Lawless said. "We've moved through this period of extreme diversity to now seeing one where the midsize capitals are slowing down a little bit."
For mortgage brokers and property professionals, this reshuffling carries both strategic and structural implications. Amid the growing complexity, understanding where genuine opportunities and risks lie is more important than ever.
Markets like Adelaide, despite their recent strength, may pose increasing risks due to high price growth and deteriorating affordability.
“Affordability [in Adelaide] is pretty close to Sydney [now] in terms of unaffordability," Lawless said. "It's got a negative rate of interstate migration. I think one of the only reasons we're seeing some further growth in a market like Adelaide is simply because supply is extraordinarily low, particularly listing numbers. [But] that will eventually change."
In contrast, Melbourne is entering a period of renewed opportunity. "Melbourne [is] a reasonably affordable market now, and also starting to see positive interstate migration coming through. [And there's] a little bit more investment attention as well," Lawless said. "I think it's sustainable."
