Key Market Insights
National dwelling values rose 0.7% in March 2026, holding the quarterly gain at +2.1% and maintaining the annual growth rate at 9.9%, even as momentum shifts unmistakably between cities.
The divergence between markets is sharpening: Perth surged 2.5% in March alone (+7.3% for the quarter), crossing the $1 million median threshold, while Sydney and Melbourne have now recorded three consecutive months of subtle decline amid falling auction clearance rates and rising advertised supply.
With geopolitical uncertainty — including the widening Middle East conflict — weighing on confidence, energy prices trending higher, and APRA's DTI restrictions biting, the near-term risk balance is tilting toward further softness in the higher-priced capitals, even as regional markets and mid-tier cities sustain outperformance.
Regional Market Insights
Regional WA again leads all regional markets with +20.4% annual growth and +6.2% over the quarter — the best rolling 3-month result of any region nationally. Bunbury is the standout performer, posting +8.4% over the March quarter to be +22.2% higher over 12 months, driven by mining-sector demand, extreme inventory shortages, and sustained interstate migration.
Regional Tasmania posted the sharpest month-on-month gain of any regional market at +1.9% in March, lifting the quarterly gain to +5.2% — its best three-month result since 2022. Launceston leads with +14.6% annual growth, overtaking Devonport (+12.9%) to become the state's strongest-performing market as mainland buyer migration accelerates.
Regional Queensland maintains powerful momentum at +14.7% annual growth, with Toowoomba now leading the region at +21.6% annually — surpassing Granite Belt (+18.7%) for the first time. Resource-belt towns and coastal lifestyle markets on the Gold Coast and Wide Bay continue to attract strong buyer interest.
Regional SA shows accelerating momentum with a +4.2% quarterly gain and +11.9% annual growth, with Eyre Peninsula and South West (+16.7%) now the top-performing SA3 in the state, reflecting spillover demand from Adelaide and rising interest from interstate buyers seeking lower price points.
Major Market Drivers
Growth Drivers
Perth Breaks Through $1 Million: Perth's median dwelling value crossed the $1,017,698 mark in March — a milestone reflecting +24.3% annual growth underpinned by advertised stock sitting approximately 40% below the five-year average, relentless interstate migration, and strong mining sector employment.
Lower Quartile Strength Nationwide: Serviceability constraints are concentrating buyer competition at the affordable end of the market. In Sydney, lower quartile dwelling values rose +1.8% over the March quarter while upper quartile values fell 1.8% — the widest tier divergence on record for this cycle.
Tight Vacancy Rates Sustain Rental Demand: National rental vacancy sits at just 1.6% — still more than 0.9 percentage points below the decade average. Adelaide (0.9%) and Perth (1.1%) remain the tightest markets nationally, sustaining competition for rental stock and supporting both yields and purchasing interest.
First Home Buyer Policy Support: The federal 5% deposit guarantee continues to activate demand at the lower price tier, partially offsetting serviceability headwinds in sub-$800,000 segments across Brisbane, Adelaide, Perth, and regional markets.
Labour Market Resilience: Employment remains high and jobs market conditions tight, reducing forced-selling risk and supporting mortgage serviceability even as real wages remain under pressure from sticky inflation.
Market Challenges
Sydney and Melbourne in Early Downturn: Since November 2025, Melbourne values have retreated 1.3% and Sydney 0.4%, with falling auction clearance rates and rising advertised supply now providing buyers more choice and reducing urgency at the negotiating table — a structural shift not seen since the 2022 rate-hiking cycle.
Geopolitical Uncertainty Weighing on Confidence: The widening Middle East conflict has contributed to a material deterioration in consumer sentiment through March. Higher energy prices — driven by fuel and utility cost increases — are amplifying cost-of-living pressures and reinforcing a cautious, "wait and see" approach to high-commitment financial decisions.
Serviceability at Record Stress Levels: With the three-percentage-point buffer in place, most borrowers must demonstrate the ability to service a mortgage at approximately 9.0%. Dwelling values relative to household incomes are at record levels, and real wage growth remains negative, shrinking the pool of qualifying buyers at every price point above the lower quartile.
Rental Affordability Crisis Deepens: A household earning the median income is now spending approximately 33% of pre-tax income on rent at the median rate — a record. Accelerating rents also carry inflation implications, given rents represent 6.6% of the CPI basket, with CPI rental inflation typically lagging market rents by around 12 months.
Home Sales Volumes Easing: Cotality estimates quarterly home sales are tracking 1.9% below a year ago and 5.6% below the five-year average — an early demand signal that, if sustained, will constrain price growth more broadly as listings continue to rise in Sydney and Melbourne.
Rental Market Trends
National Rental Growth Re-Accelerates: The Cotality national Rental Value Index maintained a monthly pace of +0.7% through March, taking the quarterly rental gain to +2.1% — the largest three-month increase since May 2024. Annually, national rents are up 5.7%, the strongest 12-month result since October 2024, adding approximately $37/week to the median rental rate.
Darwin Leads All Capital Cities: Darwin's annual rental growth reached +8.9% for houses and +9.8% for units, driven by infrastructure-led population growth and extremely tight vacancy. This is the highest rental growth rate of any capital city and 2.2 percentage points ahead of the next-best performer Hobart (houses: +7.1%).
Hobart Rental Surge: Hobart recorded +7.1% annual house rental growth — the second strongest of any capital — reflecting the compression of mainland migration into an undersupplied market. Unit rents also posted a strong +3.9% year-on-year, supporting Hobart's relatively attractive gross yield of 4.3%.
Adelaide and Canberra at the Softer End: Adelaide recorded +3.5% annual rental growth — easing further from its cycle peak — while Canberra continues to record the weakest rental conditions at +2.9% for houses and +2.0% for units, reflecting subdued population growth against an above-average completions pipeline.
Yields Holding Firm Despite Value Growth: With rents and values rising at a similar pace, gross yields are broadly stable. Nationally, rental homes returned a gross yield of 3.6%, with Darwin maintaining the highest gross yield of any capital at 6.0%. Most new investors entering outside high-yield markets will face a cash-flow shortfall after holding costs.
Market Outlook
Caution Prevails in the Near Term: Housing market conditions entering Q2 2026 are shaped by a worsening mix of cyclical and external headwinds. Prior to the Iran conflict, affordability was already stretched, sentiment was easing, and higher interest rates had reduced borrowing capacity. The addition of higher energy costs and geopolitical uncertainty has further dampened confidence, particularly for discretionary and higher-priced property purchases. The near-term balance of risks is tilted to the downside.
Divergence to Intensify: Perth, Brisbane, Adelaide and Darwin are expected to sustain outperformance through Q2 2026, supported by critically low inventory. However, the pace of gain at Perth — where 7.3% quarterly growth has added approximately $69,000 to the median value in a single quarter — is widely acknowledged as unsustainable, and some moderation is likely as affordability reaches its limits even at Perth's price point. Sydney and Melbourne are expected to remain soft, with conditions continuing to tilt toward buyers as listings lift and clearance rates ease.
Regionals Outperforming: Regional markets — particularly Regional WA, Regional Tasmania, and Regional Queensland — are positioned to continue outperforming the combined capitals through mid-2026, driven by lower price points, rising internal migration, and expanding demand from resource-sector workers and lifestyle-motivated buyers. Bunbury's extraordinary performance (+8.4% quarterly) highlights the degree of momentum still evident in select regional micro-markets.
Key Risks to Watch: The path of inflation and interest rates remains the primary watch point — any further RBA tightening would accelerate the correction in Sydney and Melbourne and could extend softness to mid-tier capitals. On the upside, if global conflict uncertainty resolves and the RBA signals easing, the combination of tight supply and improved sentiment could quickly reignite broader demand. Construction cost pressures — amplified by higher fuel and material prices — continue to constrain new supply and limit the extent of any downside correction.