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Sydney and Melbourne markets have picked up speed in May, bringing the pace of growth across the nation’s capital cities to its narrowest point since March 2021, according to the latest industry research.
Recent findings from Cotality have shown that annual dwelling value converged in May, with growth rates across the capitals tightening to their narrowest range in over four years.
Data showed that the combined value of residential real estate in Australia rose to $11.4 trillion at the end of May.
However, Cotality noted that growth for dwelling values across the nation has eased compared to last year, with the 3.3 per cent annual change in the year to May marking the lowest change since the 12 months to August 2023.
Over the month of May, Perth and Adelaide’s dwelling values registered the joint highest growth compared to last year (8.6 per cent) across the capital city markets.
On the other end of the spectrum, Melbourne’s dwelling values recorded the greatest annual decline at the end of May, sitting 1.2 per cent lower than the year prior.
Cotality highlighted that the difference between the highest and lowest annual growth rates at the end of May was just 9.8 percentage points, which was the narrowest gap for the rolling annual change in dwelling values since March 2021.
The outcome marks a stark shift from last year, with Cotality data from August of 2024 showing that the gap between the highest and lowest performing capitals (26.1 percentage points) was the widest since 2007 – during the height of the Australian boom and just prior to the global financial crisis.
Cotality research director, Tim Lawless, said that the convergence of annual dwelling growth during May had “occurred rapidly”, and signalled a changing dynamic across Australia’s various multispeed housing markets.
“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 said.
As part of this shift, Lawless said that the pace of growth in high-performing cities such as Perth, Adelaide and Brisbane had been slowing over the past year due to a variety of socioeconomic factors.
“Growth across Perth, Adelaide and Brisbane have slowed amid worsening affordability constraints, reduced interstate migration, and a drop in investment demand,” Lawless said.
Even though Lawless said that, Perth and Adelaide continued to post the joint highest annual gains of 8.6 per cent during May, still “well below their cyclical peaks of over 25 per cent”.
Contrastingly, Lawless noted that softer markets such as Sydney, Melbourne and Hobart have begun to show signs of recovery, with the effects of falling interest rates and housing prices helping to raise buyer sentiment and activity.
“For Sydney, home values have bounced back from a 12.4 per cent decline in early 2023 to positive growth by July 2023, peaking at 12.3 per cent annual growth in January 2024, but since then, growth has slowed to its lowest rate (1.1 per cent) since June 2023,” he explained.
Lawless said that the Melbourne market was also recovering, where the city’s annual rate of decline has eased from 7.8 per cent in January 2023 to 1.2 per cent over the past year, with values steadily increasing since February.
The rate of annual growth has also perked up in the Hobart market, with Lawless stating that values are up 1 per cent over the past 12 months, after a peak rate of annual decline of 11.8 per cent in March 2023.
National market activity surging year-on-year
Alongside the broader alignment in annual dwelling growth over May, data showed that 43,903 sales occurred nationally in May, which took the rolling 12-month count to 526,530.
While this monthly volume registered 1.1 per cent lower than the five-year average, Cotality noted that annual sales activity is more resilient, with sales estimates in the 12 months to May registering 2.3 per cent higher than the year prior.
Moreover, the report also showed that the amount of newly advertised property rebounded in May, with 35,069 properties listed for sale nationally over the four weeks to 1 June 2025.
The rise in newly advertised stock contributed to a modest increase in the national median time on market, which climbed to 34 days in the three months to May after temporarily falling to 30 days in the previous quarter.
Despite the shift in the pace of annual dwelling value growth across the capital city markets, Lawless highlighted that growth rates across Australia’s capital cities had tightened after moving through “the most diverse conditions since 2007”.
“For now, capital city housing markets are moving more in step than they have in years,” he concluded.
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