Key Market Insights
National dwelling values rose 0.8% in February 2026, lifting the quarterly gain to +2.1% and accelerating the annual growth rate to 9.9% — the strongest 12-month result in over a year.
A clear two-speed dynamic has emerged: regional markets (+3.2% quarterly) are outpacing combined capitals (+1.8%), while Perth, Brisbane and Adelaide continue to power ahead at record-high values as Sydney and Melbourne flatline amid affordability headwinds and rising new listings.
With inventory still critically low across most mid-tier capitals and rental growth re-accelerating nationally to 5.5% annually, the market remains fundamentally supported, though affordability constraints and the February RBA rate hike are expected to keep growth uneven across segments in the months ahead.
Regional Market Insights
Regional WA leads all regional markets with +18.6% annual growth and a quarterly gain of +5.9%, driven by mining sector momentum, extreme inventory shortages (Perth listings 48% below 5-year average), and strong interstate migration into WA.
Regional SA is the standout improver this month, posting +5.3% over the quarter and +12.6% annually, reflecting lifestyle demand from Adelaide tree-changers and sustained low supply across Barossa, Limestone Coast, and Yorke Peninsula.
Regional Queensland maintains strong momentum at +13.9% annually, with the Gold Coast, Toowoomba, and resource-belt towns leading gains; Granite Belt (+20.6%) and Toowoomba (+20.4%) among the fastest-growing SA3s nationally.
Regional Tasmania is emerging strongly with +4.8% quarterly growth, its best rolling three-month performance since 2022, with Devonport (+12.3%) and Launceston (+12.1%) driving renewed interest from mainland buyer migration.
Major Market Drivers
Growth Drivers
Critical Inventory Shortages: Perth listings remain 48% below the five-year average, Brisbane 31% below and Adelaide 23% below, creating intense competition among buyers and underpinning rapid value appreciation in these markets.
Strong Labour Market: Employment remains at near-record levels with a tight jobs market, reducing forced selling risk and supporting household mortgage serviceability despite elevated interest rates.
Lower Price Point Demand: Affordability migration is driving strong demand at the lower quartile across all capitals; in Sydney, lower quartile house values rose +0.8% in February even as upper quartile values fell 0.9%.
Targeted Policy Support: The Federal Government's 5% deposit guarantee continues to sustain first home buyer participation at the affordable end of the market, partially offsetting serviceability headwinds.
Supply Uplift in Select States: Building approvals and commencements have risen above decade averages in WA, SA, and Queensland, indicating medium-term pipeline growth — though current supply remains insufficient to meet demand.
Market Challenges
February RBA Rate Hike: The February cash rate increase has eroded borrowing power and dampened sentiment, with Sydney and Melbourne values flat over the month, reflecting particular sensitivity in high-price-point markets.
Severe Affordability Constraints: With average new mortgage sizes approaching $700k and wages growth negative in real terms, serviceability pressures are intensifying, constraining demand at higher price points.
APRA DTI Restrictions: New 20% limit on high debt-to-income lending from February 1 is reducing credit access for highly leveraged buyers, with investor credit growth running at its fastest pace since 2015 now under regulatory scrutiny.
Rising Sydney & Melbourne Listings: New listings in Sydney were 9.7% above the five-year average and 12% above average in Melbourne in February, signalling vendor motivation and adding competitive pressure on buyers in these markets.
Consumer Sentiment Softening: Confidence has declined over the past three months, likely translating into longer purchasing timeframes, more conservative decision-making, and reduced willingness to stretch household balance sheets.
Rental Market Trends
National Rental Acceleration: The national Rental Value Index rose +0.7% in February, continuing an accelerating trend in rental growth underway since October 2025. Annual rental growth reached 5.5% — the strongest 12-month result since October 2024.
Quarterly Strength: National rents rose +1.7% over the rolling quarter to February, the highest rolling quarterly gain since April 2025, pointing to a meaningful re-acceleration in rental conditions.
Darwin Leads Rental Growth: Darwin recorded +8.6% annual rental growth across all dwellings, a full 5.6 percentage points faster than a year ago, underpinned by tight vacancy rates and infrastructure-driven population inflows.
Adelaide and Perth Easing: Adelaide rental growth has eased 2.8 percentage points over the past 12 months to 3.2% — the second lowest of any capital — while Perth's annual rental growth has also softened slightly as the earlier rental surge moderates.
Canberra Softest Conditions: Canberra recorded the weakest rental market across both houses (+2.9%) and units (+2.0%), reflecting a combination of subdued population growth and above-average dwelling completions relative to its population.
Yield Compression Persists: Combined capitals gross yield sits at 3.4%; after accounting for mortgage repayments, maintenance, insurance and taxes, most new investors will face a cash-flow shortfall unless purchasing in Darwin (6.1%), Regional NT (8.1%), or select high-yield regional locations.
Market Outlook
Near-Term Direction: Housing market conditions in early 2026 are finely balanced. Growth is expected to continue but remain modest and increasingly segmented, with the sharpest appreciation at the lower end of the market where competition is concentrated and policy support is most effective. Higher-priced segments face softer outcomes driven by serviceability constraints and declining sentiment.
Two-Speed Dynamic to Persist: Perth, Brisbane, Adelaide and Darwin are expected to maintain outperformance through the first half of 2026, supported by critically low inventory levels. If the typical seasonal pattern holds, new listing flow is likely to strengthen leading into Easter, which may ease some supply pressure in Sydney and Melbourne — but not enough to trigger material price falls given overall stock still sits below historical averages across every capital.
Regionals Outperforming: Regional markets — particularly Regional WA, Regional SA, and Regional Queensland — are expected to continue outperforming combined capitals, driven by lower price points, rising internal migration rates, and sustained demand from tree-changers and resource-sector workers.
Key Risks to Watch: Any further RBA rate hikes will amplify affordability headwinds and serviceability pressure, with the risk of accelerating softness in Sydney and Melbourne. Conversely, if the RBA pivots to easing later in 2026, the combination of low supply and improved borrowing capacity could quickly reignite broader momentum. APRA's DTI restrictions and evolving investor credit conditions remain a watch area heading into mid-2026.