Australia’s housing market is increasingly diverging, with Sydney and Melbourne both recording quarterly price declines as Perth continues to record strong growth, highlighting a shift in momentum across the country’s major capitals.
The changes come as affordability pressures, borrowing constraints and more cautious buyer behaviour begin to weigh on Australia’s largest and most expensive markets.
According to Domain’s March Quarter House Price Report, Sydney house prices edged down 0.04% ($772) over the March quarter to $1.79 million, ending a three-year run of uninterrupted growth.
Melbourne recorded a larger fall, with house prices down 0.6% ($6,357) to $1.083 million, marking its first quarterly decline in 18 months and reversing part of the gains recorded late last year.
Despite the quarterly softness, annual growth remains positive, with Sydney up 6.6% and Melbourne up 4.4%, although momentum has eased as higher borrowing costs and stretched affordability reshape buyer demand.
Domain’s Chief Residential Economist, Dr Nicola Powell, said the downturn reflects a combination of sentiment and financing constraints.
“The declines we’re seeing in Sydney and Melbourne is as much about changing sentiment as it is about borrowing limits,” she said.
Rather than exiting the market, buyers are adjusting their behaviour, taking longer to commit, negotiating more carefully and increasingly recalibrating budgets.
“Buyers haven’t disappeared, but they’re behaving very differently. There’s less urgency, more negotiation and a much sharper focus on affordability,” Dr Powell said.
Units continue to outperform houses
A clear divide is also emerging between housing types, with unit markets proving more resilient as buyers shift toward lower price points.
Sydney unit prices rose 0.6% ($5,151) over the quarter to a record $848,227, extending growth to 13 consecutive quarters, the longest uninterrupted upswing since the early 2000s. Annual growth strengthened to 3.5%, the fastest pace in 1.5 years.
In Melbourne, unit prices fell 0.4% ($2,674) over the quarter, their first decline in nine months. However, annual growth rose to 5.5%, the strongest result in more than four years, with units outperforming houses for a second consecutive quarter.
Perth continues to lead gains
While Sydney and Melbourne cool, Perth is continuing to record strong growth across both houses and units, underpinned by supply constraints and population growth.
“Perth remains a standout. Prices continue to rise strongly due to extremely low supply, above-average population growth and affordability constraints being far less binding than in Sydney and Melbourne,” Dr Powell said.
Perth house prices rose 5.7% ($63,615) over the March quarter to a record $1.179 million, extending a 14-quarter growth run, the longest since the 2000s. Annual growth remains the strongest nationally at 24.6%.
Perth’s unit market also recorded strong gains, with prices up 6.0% ($39,857) to a record $700,351, and annual growth accelerating to 27.8%, the strongest in the country and the highest since 2006.
The result highlights a national housing market increasingly defined by divergence between capital cities rather than shared momentum.
“Houses in the most expensive markets are feeling the interest rate pressure first, while units are holding up better as buyers reset expectations and look for safer, more accessible price points,” Dr Powell said.