Australia’s Two-Speed Housing Market: Perth Surges While Sydney and Melbourne Slide — What Brokers Need to Know

Australia’s residential property market is no longer moving as one. While Perth posts gains of 1.5% in a single month, Sydney and Melbourne are retreating from their peaks — and the gap is widening. For brokers, this divergence demands sharply different strategies depending on where your clients are buying, and where your pipeline sits.

The latest CoreLogic data paints a striking picture: national home values rose just 0.6% over the three months to May 2026, down from 1.6% in April. The annual growth trend continues to moderate from its February peak of 10.0%, now sitting at 8.8%. Beneath those headline numbers, however, lies a market split that is reshaping how brokers need to think about client conversations, serviceability, and opportunity.

The total value of Australian residential real estate stands at $12.6 trillion at the end of May 2026 — a figure that masks enormous regional variation. Understanding where the momentum sits, and where it has stalled, is now a core competency for any broker serious about serving clients well.

The West Leads, the East Retreats

Perth and Darwin recorded the strongest monthly gains in May at 1.5% each. Brisbane and Hobart followed at 0.9%, with Adelaide posting a more modest 0.5%. These markets share a common thread: constrained supply, population-driven demand, and price points that remain more accessible relative to household incomes.

Perth’s advertised stock is tracking more than 40% below the five-year average. Brisbane sits 29% below its five-year average. When listings are this tight, upward price pressure is structural — not speculative. Buyers in these markets are competing fiercely for limited stock, and that dynamic shows no immediate sign of easing.

Contrast that with Sydney, where dwelling values fell 0.9% in May and now sit 2.1% below their November 2025 peak. Melbourne has fared even worse, declining 0.8% in May and now sitting 3.2% below its March 2022 high — a peak that was set more than four years ago. For Melbourne, the recovery that many expected has simply not materialised.

This divergence is the defining feature of the current cycle, and brokers who fail to account for it risk giving advice that is accurate for one postcode but dangerously wrong for another.

Three Rate Rises Are Doing the Heavy Lifting

The RBA has delivered three rate increases in 2026 — in February, March, and May — pushing the cash rate back to 4.35%. While this affects all borrowers, the impact is disproportionately felt in markets where price-to-income ratios are already stretched.

In Sydney, where the median dwelling value remains well above the national average, even modest rate increases translate into meaningful serviceability pressure. Melbourne faces a similar dynamic, compounded by the fact that values have not recovered to their 2022 highs, leaving some borrowers in negative equity territory.

Meanwhile, the rate rises have done comparatively little to slow Perth and Brisbane. In these markets, the combination of lower entry prices, strong population growth, and acute supply shortages has absorbed the higher rate environment. Aspiring Brisbane house buyers now need more than $17,000 in additional annual household income compared to January just to service a typical mortgage — yet prices continue to rise. That tells you something about the depth of underlying demand.

For brokers, the practical implication is clear: serviceability conversations must be market-specific. A client purchasing in Perth at today’s prices faces a fundamentally different risk profile than one buying in Sydney, even if the loan amount is identical. Your pre-qualification discussions, stress-test scenarios, and product recommendations should reflect that reality.

APRA’s DTI Limits Hit Hardest Where Prices Are Highest

APRA’s debt-to-income ratio limits — capping borrowing at six times household income — are having their most pronounced effect in exactly the markets you would expect. Sydney and Melbourne borrowers, who routinely needed DTI ratios above 6x to purchase a median-priced dwelling, are now finding their borrowing capacity constrained in ways that directly limit purchasing power.

This is not a theoretical concern. It is showing up in reduced pre-approvals, smaller loan sizes, and clients who are either downgrading their property expectations or pausing their search altogether. For brokers operating primarily in these markets, the DTI cap represents a structural headwind that rate cuts alone will not resolve.

In Perth, Brisbane, and Adelaide, the same DTI limits are far less binding. Lower median prices relative to incomes mean most borrowers can comfortably stay within the 6x cap. This creates a practical lending environment where broker conversations focus on opportunity rather than constraint.

Brokers should be proactive in explaining DTI limits to clients, particularly those accustomed to the pre-cap lending environment. Under your Best Interest Duty obligations, this means ensuring clients understand not just what they can borrow, but why their capacity may have changed — and what alternatives exist. Dual-income households, for instance, may find their combined serviceability opens doors that a single-income application cannot.

Negative Gearing and CGT Changes: Navigating Investor Uncertainty

Proposed changes to negative gearing and capital gains tax concessions are injecting uncertainty into the investor segment of the market. While the final shape of any reforms remains unclear, the mere prospect of change is influencing investor behaviour — and that behaviour varies sharply by market.

In Sydney and Melbourne, where yields are already compressed and capital growth has stalled or reversed, some investors are pausing acquisitions or divesting. The combination of falling values, higher rates, and potential tax changes creates a risk profile that is difficult to offset with rental income alone.

In Perth and Brisbane, the calculus is different. Stronger capital growth, tighter vacancy rates, and lower entry points mean the investment case remains more compelling even in a changing policy environment. Brokers working with investor clients should be helping them model scenarios that account for potential policy changes — not just current settings.

This is the kind of work that distinguishes a broker who adds genuine value. Under ASIC’s expectations around Best Interest Duty, guiding investor clients through policy uncertainty with scenario-based analysis is the standard your compliance framework should demand.

Practical Strategies: Positioning Your Brokerage for a Split Market

If You Are in a Growth Market (Perth, Brisbane, Adelaide)

Pipeline acceleration is the priority. In markets where listings are tight and demand is strong, speed and preparation matter more than they have in years. Ensure your clients have pre-approvals in place before they begin inspecting, and that those pre-approvals reflect current serviceability settings — not numbers from three months ago.

Consider building referral relationships with agents in high-demand suburbs. When stock is scarce, agents control access, and being the broker they trust to deliver clean, fast settlements gives you a structural advantage in winning referrals.

For investor clients eyeing these markets, help them understand the total return picture: capital growth plus rental yield minus holding costs. In Perth, where vacancy rates remain historically low, the rental component of the return equation is doing meaningful work.

If You Are in a Declining Market (Sydney, Melbourne)

Retention and refinancing should anchor your pipeline. When values are falling, new purchase activity slows — but existing borrowers still need servicing. Proactive outreach to clients whose fixed rates are expiring, or who may benefit from debt consolidation in a higher-rate environment, can sustain volume while the purchase market softens.

First home buyers remain active in these markets, particularly where falling values create affordability windows that did not exist 12 months ago. Position yourself as the broker who can guide first-timers through state government incentives, the First Home Guarantee, and lender-specific low-deposit products. This cohort needs more hand-holding, but they also represent the next generation of your client base.

For clients considering selling in a declining market and purchasing elsewhere, cross-state lending is an increasingly relevant conversation. A Sydney client selling an apartment and purchasing a house in Brisbane or Adelaide is not an unusual scenario — but it requires a broker who understands lending nuances across jurisdictions, including different stamp duty regimes and state-specific first home buyer concessions.

Cross-State Lending: The Emerging Opportunity

The divergence between markets is creating a new category of client: the interstate mover. Whether driven by affordability, lifestyle, or investment opportunity, more Australians are buying property in states where they do not currently live.

For brokers, this represents both opportunity and complexity. Lender policies on interstate purchases vary, aggregator panels offer different coverage by state, and your Best Interest Duty obligations extend to understanding the market conditions your client is buying into. Build relationships with conveyancers in growth markets, understand each state’s settlement timelines, and ensure your CRM can track clients across jurisdictions without dropping compliance.

Investor Client Guidance by Market

The conversation you have with an investor client should be fundamentally different depending on the target market:

• Perth and Brisbane investors: Focus on supply-demand fundamentals, rental yield strength, and the importance of acting decisively in a tight market. Help them understand that low stock levels support both capital growth and rental returns, but that entry timing still matters — particularly if DTI limits constrain their capacity to hold multiple properties.
• Sydney and Melbourne investors: Emphasise cash flow modelling under current and potential future tax settings. For clients already holding negatively geared properties in these markets, a review of their overall portfolio structure may reveal opportunities to restructure, divest underperforming assets, or redirect capital to markets with stronger near-term prospects.
• Adelaide and Hobart investors: These markets sit in the middle ground — still growing, but at a more moderate pace. For clients seeking lower-volatility exposure to property, they represent a balanced option that warrants serious consideration.

The Compliance Dimension: Best Interest Duty in a Diverging Market

A two-speed market sharpens the compliance obligations brokers face under Best Interest Duty. When market conditions vary so dramatically between cities, a one-size-fits-all approach to credit advice is not just commercially suboptimal — it is a compliance risk.

ASIC expects brokers to demonstrate that the credit product recommended is not unsuitable and that reasonable inquiries have been made about the consumer’s financial situation. In a market where Perth is rising 1.5% per month and Sydney is falling, the “reasonable inquiries” test arguably extends to understanding and discussing local market conditions with your client.

This does not mean brokers need to become property analysts. But if a client is purchasing in a declining market, you should be satisfied they understand the near-term risk, have adequate buffers, and that the loan structure accommodates potential value fluctuations. Documenting these conversations is your protection if a complaint arises down the track.

Looking Ahead: What Brokers Should Watch

Several factors will determine whether this divergence widens or narrows in the months ahead:

• RBA trajectory: If rate rises pause or reverse later in 2026, Sydney and Melbourne may stabilise. But do not count on rate cuts to restore the growth trajectory — structural supply and regulatory headwinds remain.
• Listing volumes in Perth and Brisbane: Any meaningful increase in stock levels could moderate price growth. Monitor listing data monthly — it is the leading indicator of where prices are headed.
• Policy clarity on negative gearing and CGT: Certainty in either direction will unlock investor activity. The current wait-and-see posture is itself a drag on transaction volumes.
• APRA settings: Any adjustment to DTI limits or serviceability buffers would immediately change borrowing capacity — and the markets most affected would be those already constrained.

For brokers, the single most valuable thing you can do right now is resist the temptation to treat the national market as a monolith. Your clients are not buying “Australian property” — they are buying in specific streets, in specific suburbs, in specific cities. Your advice needs to reflect that granularity.

The Bottom Line

Australia’s housing market has not moved this unevenly in years. Perth is surging on supply constraints and relative affordability. Sydney and Melbourne are retreating under the weight of higher rates, DTI limits, and policy uncertainty. For brokers, this is not a problem — it is an opportunity to demonstrate exactly the kind of market-specific, client-first advice that justifies your role in the lending chain.

Know your market. Adjust your strategy. Serve your clients with the specificity they deserve. That is how you build a brokerage that thrives regardless of which direction prices are moving.