Perth’s property market has reached a historic turning point, with its median home value rising above Melbourne’s for the first time in 10 years, according to the PropTrack Home Price Index for May.
Driven by a unique mix of affordability, supply constraints, investor interest, and population growth, the Western Australian capital has continued to outperform its eastern rivals in the post-pandemic era.
“Perth has recorded persistently strong home price growth, consistently ranking as the strongest market for price growth nationwide,” said Eleonor Creagh (pictured), senior economist at PropTrack.
Melbourne experienced the strongest monthly rise in May, with home values increasing 0.79%, continuing a recovery after prolonged softness. However, home prices in the Victorian capital remain 2.85% below their 2022 peak.
Despite this short-term rebound, Perth’s median home value has surged to $787,000, surpassing Melbourne’s $782,000 – a reversal of a long-standing gap. Five years ago, Perth homes were nearly 40% cheaper than those in Melbourne.
Perth entered this growth cycle from a low base, following years of subdued activity after the mining boom ended. That affordability became a magnet for homebuyers and investors, especially as east coast prices surged during the pandemic.
“Affordability has been a key driver,” Creagh said. “With a lower starting point, Perth offered better value for money, a quality that resonated with both home buyers and investors.”
Remote work, lifestyle shifts, and high rental returns have further drawn interest into the Perth market, alongside growing population pressures.
Western Australia’s population has surged since the pandemic, with interstate migration turning positive and overseas migration accelerating since 2022. This has added pressure to an already tight housing market.
Meanwhile, new housing supply has struggled to keep up. Builders have faced high input costs, skilled labour shortages, and supply chain delays – all contributing to fewer completions and a widening supply-demand gap.
“This value proposition has since been reinforced by fast rental price growth, low vacancies, and strong yields, enticing a wave of investor activity,” Creagh said.
Perth’s rental market remains among the tightest in the country. Vacancy rates are near record lows, and rents have climbed rapidly over recent years. The strong rental outlook and capital gains have boosted investor activity.
In contrast, Melbourne has faced multiple headwinds. While it remains a more diverse and larger market, its price growth has underperformed. Over the past five years, Melbourne has posted less than 20% growth – compared to an average of 60% across other capitals.
Victoria’s property market has also felt the effects of tax and regulatory changes. The state has the highest property taxes in the country, and recent legislation mandating minimum rental standards has significantly lifted landlord costs.
These rising holding costs, coupled with higher interest rates in 2024, have led many investors to exit the Melbourne market.
While Perth’s rapid growth is expected to slow after years of strong gains, the fundamentals remain supportive. Tight rental markets, solid migration trends, and a resilient labour market are likely to underpin demand into late 2025.
“Although affordability pressures are beginning to weigh on momentum, the prospect of further interest rate reductions and constrained new housing supply are expected to underpin continued – albeit slower – price growth over the remainder of 2025,” Creagh said.
