Battle of the cities: Brisbane homes now as pricey as Melbourne, Perth powers ahead

Property prices have reached another record high across the country, with some unlikely contenders now snapping at the heels of their pricier rivals.

The latest PropTrack Home Price Index shows national property prices hit a new record high in February, although the gains were not felt equally among all capital cities.

Perth, Adelaide and Brisbane remain the strongest markets over the past year with prices up 16.32%, 12.76% and 12.16% respectively.

The relative affordability of these cities’ homes, population growth and very tight rental markets are supporting home values, while low stock levels are intensifying competition.

In fact, strong growth has pushed up dwelling values in Brisbane to rival Melbourne, with both cities’ median value sitting at $797,000 – on par for the first time in 14 years.

Values in Brisbane could be on track to surpass values in Melbourne in a matter of weeks with the pace of home price growth in Brisbane more than three times as fast as growth in Melbourne so far this year.

The price premium Melbourne has held over Brisbane for many years eroded after Brisbane recorded exceptionally strong growth throughout the pandemic and over the past year, while Melbourne lagged.

Through the pandemic period Queensland experienced an unprecedented population influx, with more people moving interstate to Queensland than to anywhere else in Australia.

As a result, Brisbane was a winner during the pandemic boom and has been one of the strongest-performing markets since the pandemic onset, with prices up 60.7% since March 2020.

Brisbane’s performance is matched only by Adelaide (62.3%), regional Queensland (63.0%), and regional SA (63.7%).

 Over the same period, home prices in Melbourne have risen just 16.5%.

Properties in Melbourne have been more expensive than homes in Brisbane since 2010. Five years ago Brisbane’s median dwelling value was just $485,000, while Melbourne’s was $683,000 – about 1.4x that of Brisbane.

For a period in 1994-97 median sales prices in Brisbane were just ahead of Melbourne. Prices in Brisbane then narrowly surpassed Melbourne again between 2006-2010, but since 2010 dwelling values in Melbourne have been higher.

The supply of properties listed for sale in Brisbane has been consistently tight since the pandemic onset. At the same time, the city has experienced record net population inflows from the southern states.

Brisbane has been one of the strongest markets in the country since the pandemic. Picture: Getty

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In fact, the strong run of growth in Brisbane has also seen the city’s comparative affordability relative to Sydney narrowing.

These population flows have continued post-pandemic and according to the Commonwealth Bank Regional Movers Index released this week, Perth and Brisbane are the only capitals continuing to attract net inflows from other capital cities and regions over the 12 months to December 2023.

Choice for buyers remains very limited in Brisbane, Adelaide, and Perth. The total number of properties listed for sale was down more than 40% relative to the prior-decade average in January 2024. Limited housing supply relative to demand has propelled values.

Melbourne on the other hand has seen much weaker growth after the city recorded large losses to other states and regional areas through the pandemic period.

More recently buyers in Melbourne have consistently enjoyed more choice relative to other markets, with the total number of properties listed for sale sitting above the decade average since mid-winter, contributing to the lagging home price recovery in Melbourne.

Houses vs units: Melbourne still slightly ahead, but for how long?

Although median dwelling values in Brisbane have caught up to Melbourne, the composition of housing stock has played a part.

Both house and unit values in Melbourne remain slightly more expensive, with the large number of units in Melbourne weighing down median dwelling values.

However, median house and unit values in Brisbane are respectively just $17,000 and $14,000 below Melbourne’s and are likely to surpass values in Melbourne if the city’s price recovery keeps lagging while Brisbane records strong growth.

Perth gains on small-but-mighty rival

Prices in Hobart have fallen for 19 of the past 23 months, and in February Hobart was the weakest capital city market when comparing both annual price growth (-2.26%), as well as the change from peak (-7.99%).

However, this comes after several years of outperformance, as well as strong growth during the pandemic, which has seen affordability deteriorate as interest rates have risen.

Hobart could soon become the second cheapest capital city market behind Darwin. Picture: Getty

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The comparative strength in conditions in Perth relative to Hobart could cause median values in Perth to overtake Hobart once again this year.

Buyers in Perth are facing record-low choice, which is resulting in a sellers’ market.

While affordability has declined significantly as interest rates have risen, WA remains the most affordable state across Australia, which is likely supporting prices as well.

In January 2019 when Hobart’s run of strong performance was beginning, median values in Perth were higher than in Hobart.

Five years and a pandemic-induced property boom later and Hobart is more expensive than Perth , but that gap is quickly narrowing.

With home prices in Perth continuing to rise at a fast pace and Hobart prices still falling, there is just a $13,000 difference in median values.

If this trend continues it’s likely that Hobart will become the cheapest capital city market apart from Darwin at some point over the coming quarter.