Property prices are falling – in 2 out of hundreds of markets
"Property prices are falling."
You’ve seen that headline roughly 47 times this month. And honestly? It’s true. Sydney dwelling values dropped 0.9% over the quarter to April 2026. Melbourne fell 1.5%. Auction clearance rates in Sydney hit 54% on a recent weekend – down from 70% at the same time last year.
But that headline is doing a lot of heavy lifting for a country with hundreds of property markets.
Because the exact same data set – same report, same page, same quarter – tells a completely different story for the rest of the country. And if you’re making actual decisions with actual money based on national headlines, you’re navigating with the wrong map.
I made a short video breaking down the key numbers – watch it here – but this article goes deeper into what the data actually means for investors.
The national number: +9.8%. Sounds healthy. It’s not useful.
According to the Cotality Monthly Housing Chart Pack for May 2026, Australian dwelling values rose 9.8% over the 12 months to April 2026. That’s across 11.5 million dwellings worth a combined $12.6 trillion.
On paper, that looks like a market doing just fine. In practice, it’s about as useful as the average temperature across all of Australia – it won’t help you decide whether to pack a jacket or sunscreen.
Because when you peel one layer back, the picture changes dramatically.
Capital city breakdown: a 24 percentage point spread
The annual growth figures by capital city tell a story of extreme divergence, not uniform growth.
Perth grew 26.0% over the past year. Record high. Brisbane grew 19.7%. Record high. Darwin grew 19.6%. Record high. Adelaide grew 12.2%. Record high.
At the other end: Sydney grew just 4.2% annually but is actually falling on a quarterly basis – down 0.9% over the three months to April, sitting 1.0% below its November 2025 peak. Melbourne managed just 2.0% annual growth, down 1.5% over the quarter, and still sitting 2.3% below the record high it set in March 2022 – more than four years ago.
That’s a 24 percentage point gap between the best-performing and worst-performing capital cities. According to Cotality, it’s the widest capital city divergence they’ve recorded.
Same country. Same interest rate environment. Same Budget. Completely opposite outcomes.
Go one layer deeper: same city, different price brackets, opposite outcomes
This is the part most commentary skips entirely, and it’s arguably the most important data point for investors.
Cotality’s stratified hedonic index breaks each capital city into three value segments: the lowest 25%, the middle 50%, and the highest 25% of homes. The results are remarkable.
Sydney
The most affordable 25% of Sydney homes grew 1.5% over the quarter to April. The middle 50% grew 0.4%. The most expensive 25%? Down 2.7%.
Same city. Same quarter. One end growing, the other getting properly smoked.
Melbourne
Melbourne’s bottom quartile still eked out 0.5% growth. The middle 50% fell 0.7%. The top quartile dropped 2.9% – the worst-performing segment of any east coast capital.
Perth
Perth’s bottom quartile grew 8.3%. Middle 50%: 7.3%. Top quartile: 5.7%.
Read that again. Perth’s worst-performing segment – the top 25% of homes – still grew 5.7% in a single quarter. That’s Perth’s slowest bracket outperforming Sydney’s fastest by nearly 4 to 1.
Brisbane
Brisbane followed a similar pattern to Perth: bottom quartile grew 6.1%, middle 50% grew 5.2%, top quartile grew 3.5%. Every segment positive. Every segment outperforming the national average.
What’s driving the split?
There are three forces at work here, and they’re all pointing in the same direction.
Serviceability is squeezing the top end. The RBA has hiked rates three times in 2026, taking the cash rate back to 4.35% – erasing every cut from 2025. The average investor variable rate now sits around 5.91%. Borrowers at the higher end of the market feel this most acutely because their loan sizes are larger. A 25 basis point hike on a $2 million mortgage is a very different conversation to the same hike on a $500,000 mortgage.
The affordable end has structural demand. First home buyer lending surged 6.8% by volume and 15.5% by value in Q4 2025, boosted by the expansion of the federal government’s 5% deposit guarantee. That demand is concentrated in the lower price segments – which is exactly where we’re seeing growth hold up even in soft markets like Sydney.
Supply is not uniform. Total advertised stock in Perth is 14.7% lower than a year ago. Darwin is 22.0% lower. In these markets, buyers still compete for limited stock and vendors hold pricing power. In Sydney and Melbourne, stock levels have risen 8.5% and 7.0% respectively, giving buyers more options and more room to negotiate. Vendor discounting across the combined capitals has widened from 2.9% to 3.1%.
Regional markets: the story nobody’s headline-ing about
The divergence doesn’t stop at capital city boundaries.
Regional WA grew 21.7% over the past year. Regional Queensland grew 15.0%. Regional Tasmania grew 11.2%. Regional NSW grew 9.1% – more than double Greater Sydney’s 4.2%.
Regional Victoria grew 7.9% – nearly four times Melbourne’s 2.0%.
These aren’t fringe markets. They’re towns and cities with growing populations, tight rental markets, limited supply pipelines, and employment bases that don’t depend solely on a capital city CBD. For investors who’ve been conditioned to think “capital city = safer,” the data right now argues otherwise.
The rental market reinforces the divergence
National rental growth has reaccelerated from 3.4% in June 2025 to 5.7% in April 2026, with vacancy rates sitting at 1.7% nationally – well below the decade average of 2.5%.
But again, the national number obscures more than it reveals. Perth rents are growing at 7.0% annually. Darwin at 9.1%. Regional Tasmania at 10.1%. Regional WA at 9.0%.
These are also the markets with the tightest vacancy rates and the strongest capital growth – because rental demand is a leading indicator of price growth, not the other way around. When tenants compete for a shrinking pool of rentals, yields compress until investors arrive to build the stock. That flow of capital is what drives values.
With the Federal Budget flagging negative gearing changes on established properties from 1 July 2027, the investor incentive to hold rental stock in tight markets is shifting. We’ve written about those changes in detail [link to existing Budget blog post] – but the short version is that new builds are exempt, existing investors are grandfathered, and the policy is likely to further concentrate investor demand in markets where yields and growth fundamentals are strongest.
So what does this actually mean for investors?
Three things.
First, stop reading national averages. The +9.8% national figure and the “prices are falling” headline are both technically correct and both practically useless. Your investment outcome depends on which market, which price segment, and which property type you’re in – not what “Australia” did on average.
Second, market selection has never mattered more. The difference between buying in Perth and buying in Melbourne over the past 12 months isn’t a rounding error. It’s 24 percentage points of growth. On a $600,000 property, that’s roughly $144,000 of equity – or the lack of it. That gap didn’t emerge overnight. The vacancy data, population flows, and supply pipeline numbers have been pointing in this direction for over a year.
Third, the price segment you target matters as much as the city. Even in a softening market like Sydney, the affordable end is still growing. In a booming market like Perth, the affordable end is growing fastest. The serviceability ceiling is real – higher rates compress what people can borrow, and the top of the market feels it first. For investors, the sub-$600,000 and sub-$800,000 brackets are where the rental demand is deepest and the capital growth has been most resilient.
The only question worth asking
Next time someone tells you property prices are falling – or rising, or booming, or crashing – ask one question.
Where?
Because right now, the answer changes everything.
Watch the short video breakdown of these numbers: youtube.com/shorts/4q85S0H2zlo