Luxury markets in Sydney and Melbourne are showing renewed momentum after several years in which prestige buyers diverted to lifestyle regions, according to Ray White Group senior data analyst Atom Go Tian (pictured).
Go Tian said the pandemic reshaped buyer behaviour and temporarily pushed Australia’s luxury centre of gravity away from the two largest cities.
“If you were speaking about luxury houses five years ago, you wouldn’t even consider markets outside of Sydney and Melbourne,” he said.
During the pandemic “luxury buyers proved themselves to be the most flexible and flocked away to where luxury was still sold at a discount.”
This diversion occurred even as the ultra-premium end of the market continued to see extraordinary results, with trophy homes selling for up to 70 times the value of a typical Australian house, now at $952,000, according to PropTrack.
Sydney’s prestige market has been the strongest performer among the two major capitals over the past year. Luxury house prices rose 6% between 2024 and 2025, following 2% growth between 2023 and 2024, pushing the city to a new peak of $4.5 million.
Melbourne continues to lag, with luxury prices yet to return to their COVID peak. Prestige house values grew 5% between 2024 and 2025 after a 1% decline between 2023 and 2024, ending 2025 at $2.6 million.
Over the past five years:
Weaker growth in Melbourne has allowed the Sunshine Coast ($2.76 million) and Gold Coast ($2.86 million) to overtake Melbourne ($2.62 million) as Australia’s second- and third-most expensive luxury markets.
Price gaps have also closed sharply:
Go Tian said the narrowing gaps may be prompting buyers back toward the major capitals.
“It’s easy to assume the new normal is a decentralised luxury market, but if the last 12 months signal what's to come, luxury buyers may just be beginning to rediscover the value of Sydney’s prestige waterfront streets and Melbourne’s leafy inner suburbs,” the Ray White economist said.
The discounts that drew high-end buyers toward Southeast Queensland are no longer as pronounced. With shrinking price differentials and renewed demand for premium locations, Sydney’s higher values appear more justified relative to its limited waterfront supply and international appeal.
Melbourne’s recovery has been slower, with extended lockdowns — the longest cumulative lockdown in the world — dampening its appeal among affluent buyers who had the flexibility to relocate.
Yet this underperformance could set up a stronger rebound.
“At only 17% growth over five years, it significantly underperformed relative to its fundamentals as Australia's second-largest city,” Go Tian said.
If interest rate cuts materialise in 2026 and confidence returns, both Sydney and Melbourne could draw prestige buyers back from coastal and lifestyle markets, driven by renewed perceptions of relative value.
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