Two months into 2026, home values in Sydney and Melbourne have flatlined, even as mid-sized capitals post bumper monthly gains, according to Cotality's latest Home Value index.
Perth remains the nation's standout performer.
Dwelling values climbed 2.3 per cent in February alone, adding more than $22,500 to the median home.
Over the past year, prices in the WA capital have surged 27.1 per cent.
Brisbane and Adelaide are also outperforming, rising 1.6 per cent and 1.3 per cent, respectively, in February.
By contrast, median homes in Sydney and Melbourne saw zero growth over the month, rounding out a quarter of mild declines.
Cotality research director Tim Lawless described the gulf as extraordinary, saying the property markets of major and mid-sized capitals had been drifting apart for years.
"We've been seeing two-speed conditions for some time now," Mr Lawless told AAP.
"But we're seeing the divide really open up as Sydney and Melbourne pretty much flatten out."
Tight supply and high demand are driving outsized gains in other capitals, he said.
Listings in Perth were nearly 50 per cent below their five-year average in February, with Brisbane down 31 per cent and Adelaide 23 per cent.
In Sydney and Melbourne, however, advertised listings were only slightly below average while new listings were well above five-year norms.
"I would speculate we're seeing vendors in those two markets getting in while selling conditions are still reasonably strong," Mr Lawless said.
"There's a growing expectation the market will probably weaken further from here and selling conditions may become harder."
Sydney and Melbourne tend to lead the property cycle, paving the way for price trends to play out across smaller capitals.
While prices are rising nationwide, Mr Lawless said property trends could become harder to predict should "two speed" growth persist.
"The clear slowdown in housing conditions across Sydney and Melbourne could signal an easing in growth conditions elsewhere down the track," he said.
"But for now, the mid-sized capitals continue to see support from extremely low inventory levels, which is boosting the growth in values."
Nationally, price growth is increasingly concentrated at the lower end of the market, a trend most evident in more expensive cities.
Over the past year, Sydney's upper-quartile house values rose just 3.5 per cent, compared with a 12.7 per cent lift in the lower-quartile.
High borrowing costs and stretched household budgets are forcing buyers to target more affordable homes, Mr Lawless said.
Based on Cotality assumptions, the median household would spend about 45 per cent of pre-tax income on repayments for a median home.
"Most lenders aren't going to approve a loan on those sort of numbers," Mr Lawless said.
