Growth converging in capitals as Perth prices overtake Melbourne’s

Scott Kuru June 12, 2025 5 min read

KEY POINTS

Cotality says home value growth across Australia’s capitals is the most aligned in over four years, with the gap between the best and worst-performing cities narrowing
The rate of home price growth is slowing in mid-sized capitals like Perth, Adelaide and Brisbane, while lagging markets such as Melbourne and Hobart pick up pace
Separate figures from PropTrack show that Perth’s median home price ($787,000) has overtaken Melbourne’s ($782,000) for the first time in a decade

Home value growth rates across Australia’s capital cities have tightened to their narrowest range in over 4 years, according to new data from Cotality - formerly CoreLogic.

The findings come as rival data house PropTrack says the median home price in Perth has overtaken Melbourne’s for the first time in a decade.

Changing Dynamics

Over the last four years, Cotality says home values in Australia’s capital cities have moved through the most diverse conditions in 18 years.

The data analytics firm points out that it was only in August last year when the gap between the highest and lowest performing capitals was at its widest since 2007 - at the height of the mining boom and just prior to the Global Financial Crisis - with a range of 26.1%.

However, in May 2025, the difference between the highest and lowest annual growth rates amongst the capitals was just 9.8%, the narrowest gap since March 2021.

Cotality Research Director Tim Lawless says this convergence has occurred rapidly and signals what he terms “a changing dynamic” in the Australian housing market.

“The convergence of growth rates is attributable to the pace of capital gains slowing across the mid-sized capitals, while previously soft markets like Melbourne, ACT and Hobart move back into a positive growth position,” he says.

“Growth across Perth, Adelaide and Brisbane has slowed amid worsening affordability constraints, reduced interstate migration, and a drop in investment demand.

“Despite the slowdown, Perth and Adelaide continue to post the strongest annual gains at 8.6%, though well below their cyclical peaks of over 25%,” he says.

Mr Lawless says the weaker capital city markets are showing signs of recovery, supported by falling interest rates and housing becoming more affordable as prices have reduced.

“For Sydney, home values have bounced back from a 12.4% decline in early 2023 to positive growth by July 2023, peaking at 12.3% annual growth in January 2024, but since then, growth has slowed to its lowest rate (1.1%) since June 2023.

“Melbourne’s annual rate of decline has eased from -7.8% in January 2023 to -1.2% over the past year, with values steadily increasing since February,” he says.

“Hobart’s rate of decline has turned positive, with values up 1.0% over the past 12 months following a peak rate of annual decline of -11.8% in March 2023.

“For now, capital city housing markets are moving more in step than they have in years,” Mr Lawless says.

Cotality estimates that nationally, home values grew 3.3% in the year to May 2025, the slowest annual home value increase since August 2023.

Regional parts of Australia have performed best over the past year, with Regional WA (+12.5%) and Regional SA (+12.4%) leading the way.

Across the capitals, Darwin led the pace of quarterly growth, with dwelling values up 4.3% over the three months to May.

Perth and Brisbane tied for second, with values increasing 1.6%.

Perth versus Melbourne

Perth has also reached a significant milestone, according to rival data house PropTrack.

The REA Group-owned research body says Perth’s median home price has overtaken Melbourne’s for the first time in a decade.

“The shift reflects the turnaround in Western Australia’s housing market since 2022, underpinned by a unique combination of affordability, population growth, investor demand and supply constraints,” says REA Group Senior Economist, Eleanor Creagh.

Proptrack’s latest Home Price Index publication shows Melbourne saw the strongest monthly rise (+0.79%) in median home prices in May 2025, continuing its recovery after a prolonged period of softer growth.

However, prices remain 2.85% below the 2022 peak.

Despite that strong monthly performance by the Victorian capital, Perth’s median home price of $787,000 has overtaken Melbourne’s at $782,000 for the first time in ten years.

“This reflects Melbourne’s relative weakness compared to Perth’s persistent outperformance in recent years,” Ms Creagh says.

“Just five years ago, Perth’s home values were sitting at a deep discount relative to Melbourne’s, with the median value of homes in Perth priced at nearly 40% less.”

REA Group Senior Economist Eleanor Creagh says Perth’s fundamentals have been turned around by a combination of factors.

The first is relative affordability.

“With a lower starting point, Perth offered better value for money, a quality that resonated with both homebuyers and investors, particularly as remote work trends and changing lifestyle preferences encouraged relocation.

“This value proposition has since been reinforced by fast rental price growth, low vacancies, and strong yields, enticing a wave of investor activity.”

The second is population growth in Western Australia.

“Net interstate migration turned positive during the pandemic and has remained elevated, while overseas migration has surged since 2022,” she says.

“This momentum has placed growing pressure on housing stock.”

And the third factor is the limited supply of new housing.

“Construction activity has been constrained by elevated input costs, trade shortages, and capacity issues across the building sector.

“The number of new homes being completed remains below historic norms, even as demand has climbed, with this mismatch driving competition and price escalation.”

As a result, Ms Creagh says rental conditions in Perth are now among the tightest in the country.

“Vacancy rates have been at record lows, and rents have risen rapidly for much of the past few years.

“This has heightened the appeal for investors seeking capital growth alongside strong rental returns, further intensifying competition for homes.”

In contrast, “while Melbourne remains a larger and more diversified market, it has faced headwinds from slower population growth, and more subdued price momentum over recent years.

“Comparing growth over the past 5 years, Melbourne is the weakest capital city market by a long shot, with prices having risen by less than 20%, compared to an average of 60% across the other capitals,” she says.

However, with median home values converging across the capital cities and the pace of home price growth picking up in Melbourne, it may not be long before the Victorian capital again surges past its western cousin.