Australia's property market has split into two distinct cycles, with new data from Cotality's June 2026 Monthly Housing Chart Pack showing national dwelling values up just 0.6% over the three months to May — a figure that conceals sharply diverging fortunes across the capitals.
Sydney values fell 2.1% over the quarter and are now 2.1% below their November 2025 peak. Melbourne was down 2.3%, sitting 3.2% below its March 2022 peak. Brisbane, Adelaide, Perth, and Darwin, by contrast, all remain at record highs — with Perth leading at 25.8% annual growth.
Cotality research director Tim Lawless (pictured) said the divergence was being driven by rate pressure and affordability constraints landing hardest on the two largest markets.
"Sydney and Melbourne are already five months into the early phases of decline, while price growth is slowing across the mid-sized capitals," Lawless said. "Listings are picking up as demand softens, interest rates are rising, while affordability and serviceability pressures are biting."
The cash rate sat at 4.35% in June following three consecutive hikes earlier in 2026, fully reversing last year's cuts. Even if this proves to be the peak, Cotality notes that any easing is unlikely until well into 2027, with inflation remaining stubbornly above target and the labour market still tight.
Variable rates for new owner-occupier loans reached 5.93% in March, with long-term fixed rates for investors climbing to 6.6%.
The squeeze on serviceability is already showing up in buyer behaviour: auction clearance rates have dropped below 60% — well under the decade average of 64% — and national sales over the three months to May were 2.2% lower than a year ago and 4.1% below the five-year average.
In Sydney and Melbourne, the median capital city vendor discount has widened from 3.1% to 3.3%, as rising listings give buyers greater negotiating power than they have had in years.
Units are now outperforming houses in four of eight capitals — Perth, Brisbane, Adelaide, and Sydney — as affordability constraints push buyers down the price ladder. Brisbane units recorded 21.8% annual growth against 18.6% for houses, while Perth units gained 27.8% versus 25.6% for houses. The same pattern holds within cities: across every capital except Hobart and Canberra, the lowest 25% of dwellings by value outperformed the top 25% over the quarter.
First-home buyer lending is reflecting this dynamic. As a share of owner-occupier lending, first-home buyers reached 29% nationally in the March quarter — slightly above the decade average of 27.6% — driven by the expansion of the 5% deposit guarantee.
The convergence of accelerating rents and softening values is beginning to improve yield metrics. The national gross rental yield rose to 3.62% in May, with regional markets offering materially stronger returns at 4.2% compared to 3.5% across the capitals. Darwin led all capitals at 6.0%, while Sydney (3.2%), Brisbane (3.3%), and Adelaide (3.4%) remained at the lower end.
National rents were up 5.9% year-on-year in May, with the vacancy rate tightening to 1.5% — well below the decade average of 2.5%. Investors who held through the recent period of yield compression are now seeing that position improve. That improvement comes with a caveat, however — the federal budget's negative gearing changes are expected to temper new investor activity in established properties from 2027, and Cotality notes the investor share of new lending, currently at a nine-year high of 40.3%, is likely to fall in coming quarters as the policy impact flows through.
Read the full Cotality Monthly Housing Chart Pack for June 2026 at cotality.com/au/insights.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
