Australian housing market update | May 2026

Key takeaways

The national market rose just 0.3% in April, representing the slowest monthly growth increment since January 2025 as multi-layered headwinds begin to compound.

A sharp city-level split is occurring, with Perth's monthly values surging 2.1% while Sydney and Melbourne values both dropped by 0.6%, leading the headline deceleration.

The flight to affordability is concentrating demand below the median price point, causing lower-quartile properties to consistently outperform the premium tier across every capital city.

The national housing market is navigating a distinct cyclical turning point, with Cotality’s National Home Value Index rising by just 0.3% in April, taking the slowest monthly growth recorded since January 2025.

While values continue to trend higher on a national level, the pace of appreciation is clearly losing momentum as the housing cycle moves through a turning point.

This national average, however, masks a significant and growing divergence between the major capital cities and different price points.

Market conditions are becoming increasingly uneven. While mid-sized capitals like Perth and Brisbane continue to show resilience, the larger markets of Sydney and Melbourne are entering a clear downswing.

This segmentation is also evident across value tiers, with the more affordable lower quartile consistently outperforming the premium end of the market across most jurisdictions as buyers hit strict borrowing limits.

National Market Performance

The performance gap between cities has reached extreme levels, with Perth's rolling annual growth outstripping the rest of the nation by a significant margin.

Affordability and supply levels remain the primary determinants of these contrasting results.

Source: Cotality, May 2026

Affordability and Serviceability Constraints

The primary challenge facing the national market is a worsening mix of record-low affordability, high interest rates, and stubborn cost-of-living pressures.

With mortgage rates remaining elevated and a sudden rise in transport costs, consumer confidence has dropped sharply, adding to the headwinds for housing demand.

Note: This "affordability ceiling" is shrinking the pool of buyers, forcing demand to concentrate heavily in the entry-level brackets where borrowing power stretches further.

For example, in Sydney, lower-tier housing values are up 2.9% year-to-date, while the most expensive quarter of the market has fallen by 3.3%.

This reflects a defensive shift toward more affordable stock by buyers who are less impacted by the serviceability assessments required for larger premium loans.

Supply Dynamics and Future Outlook

Supply remains a key stabiliser but is also increasingly fragmented depending on localised inventory levels.

In the weaker markets of Sydney and Melbourne, advertised listings are tracking 12% and 3.5% above the five-year average, shifting the balance of power toward buyers.

Conversely, supply in Perth and Brisbane remains incredibly tight, maintaining upward pressure on values.

Source: Cotality, May 2026

The outlook for the remainder of 2026 looks like a further loss of momentum rather than a major correction.

While a strong labour market prevents a sharp downturn by keeping forced selling to a minimum, geopolitical risks, normalising population growth, and interest rate uncertainty are weighing on consumer sentiment.

Growth is expected to remain uneven, with new dwelling construction continuing to undershoot underlying demand, providing a floor for home values while the market moves through a highly fragmented cycle.

About Tim Lawless Tim is Research Director at Cotality (formerly CoreLogic), analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au