The Perth real estate market has reached a significant milestone, with the medium value of the city’s housing surpassing Melbourne for the first time in a decade, according to the latest Proptrack housing price index (May 2025).
The change reflects the change in the real estate market of Western Australia since 2022, backed by a unique combination of affordability, population growth, demand demand and offer contracts.
Melbourne had the strongest monthly increase (+0.79%) in May 2025, continuing its recovery after a prolonged period of softer growth. However, the values remain 2.85% below the 2022 peak.
Despite Melbourne’s monthly profits, the average domestic value of Perth of $ 787,000 has surpassed Melbourne at $ 782,000 for the first time in a decade. This reflects Melbourne’s relative weakness compared to the persistent performance of Perth in recent years.
Only five years ago, the values of Perth’s homes were in a deep discount in relation to Melbourne’s, with the average value of houses in perth price at almost 40% less.
The graph that compares the relative estimates of AVM value shows that from 2016 to 2020, Perth Homes was constantly negotiated well below Melbourne.
However, since mid -2022, Perth has registered persistently strong growth in housing prices, consistently classified as the strongest market for price growth throughout the country.
As a result, the city has a leg in a high trajectory, which culminated in the average value of the house and now exing that of Melbourne.
From Underdog to external performance
The rapid growth of the value of perth has been driven by structural and cyclical dynamics.
The city entered this increase from a low base, after a prolonged period of moderate price growth duration, the recession of mining investment and the subsequent market stagnation.
This relative affordability became a key attractor, especially as the prices of properties on the east coast increased through pandemic and interest rates were transferred in 2022, reducing loan capabilities and increasing mortgage service costs.
The affordability has a key a key. With a lower starting point, Perth offered a better value for money, a quality that resonated both housing buyers and investors, spectatularly as remote work trends and changing lifestyle preferences encouraged relocation. Since then, this value proposal has been reinforced by rapid rental growth, vacancies and strong yields, which attracts a wave of investor activity.
Population pressures and supply tension
The growth of the population of Western Australia has also played an important role. The net interstate migration toured the pandemic and has remained high, while migration abroad has increased since 2022. This impulse has exerted growing pressure on the stock of homes.
At the same time, the new supply has failed to maintain rhythm. The construction activity has been limited by high supplies costs, shortage of operations and capacity problems throughout the construction sector.
The number of new houses that are completed remains below the historical norms, even when the demand has increased, with this competition for impulse of mismatch and the price escalation.
Investor and Rental Dynamics appetite
The rental conditions in Perth are among the most adjusted in the country. Vacancies rates have legs in minimum records, and rentals have increased rapidly for much of recent years. This has seen the appeal of investors seeking capital growth along with strong rental returns, further intensify the competition for households.
While Melbourne remains a larger and more diversified market, it has faced winds against the most slow population and more moderate price impulse in recent years.
Perth rentals have continued the increase. Image: Realestate.com.au/sold
When comparing growth in the last five years, Melbourne is the weakest capital city for a long shot, and prices have increased by less than 20%, compared to an average or 60% in the other capitals.
Currently, the State has the highest property taxes in Australia and the owners have fought to keep up with a significant increase in the minimum legislation costs of rental ownership standards.
The Victorian government has also increased property taxes in investment properties as part of the budget announced in May 2023.
These additional taxes have made having a rental property less attractive in victory and combined with higher sustained interest rates in 2024 and higher tenure costs, many have sold investment properties.
Looking to the future
While the rhythm of housing prices growth in Perth has moderated after a prolonged period of shock, the real real estate market still enjoys cyclical tail winds.
Persistently low rental vacancies rates, the solid growth of the population and a relatively solid labor market continue to support the demand.
There are affordable pressures are beginning to weigh on the impulse, the perspective of greater reductions in interest rates and supplies of new and limited housing is expected to support, although slower, the growth of prices in the rest of 2025.
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