By Kalpi Prasad | Renown Group Australia
There is a conversation happening in property circles right now that is more important than any headline about median prices, auction clearance rates, or interest rate forecasts. It is a conversation about divergence — about the growing gap between property markets that are genuinely strengthening and property markets that are quietly deteriorating, even as the national statistics suggest everything is fine.
The national median is a fiction. It always has been, but in 2025 the fiction is more dangerous than usual. Because the forces driving Australian property are no longer uniform. They are geographic, demographic, and structural — and they are pulling the market in two very different directions simultaneously.
If you are an investor making decisions based on national averages, you are making decisions based on a number that describes nowhere and applies to no one.
The market that is working
The markets that are genuinely performing share several characteristics that are worth understanding, because they are not accidental.
Population growth that is real, not projected. Adelaide, Brisbane, and Perth are experiencing population growth driven by interstate migration, international migration, and natural increase. This growth is not speculative — it is happening now, it is measurable in school enrolments and rental vacancy rates, and it is creating genuine demand for housing that the existing supply cannot meet.
Adelaide’s population growth has been particularly striking. A city that spent decades losing its young people to Sydney and Melbourne is now retaining them — and attracting new residents from those cities. The drivers are structural: a cost of living that allows a quality of life that Sydney cannot match, a defence industry that provides high-paying permanent employment, and a cultural vibrancy that has transformed the city’s appeal.
Infrastructure that creates lasting value. The property markets outperforming in 2025 are disproportionately located near significant infrastructure investment. The correlation is not coincidental. Infrastructure creates employment during construction, permanent connectivity and amenity once completed, and a signal of government commitment that attracts private capital.
South Australia’s infrastructure pipeline — the South Road tunnels, the new Women’s and Children’s Hospital, the Adelaide Airport expansion — is reshaping property values across entire corridors of the city. Suburbs that were unremarkable five years ago are now attracting development interest because the infrastructure coming online will fundamentally change their accessibility and desirability.
Rental yields that justify investment. In the strongest markets, rental yields have expanded even as capital values have grown — a combination that is unusual and that reflects a genuine scarcity of rental supply. Vacancy rates below 1% in Adelaide and Perth are not normal market conditions. They are a structural undersupply that will take years to resolve, and in the interim, investors in well-located rental properties are earning yields that comfortably service debt and generate positive cash flow.
The market that is stalling
The other side of the two-speed market is less comfortable to discuss, particularly for the significant number of Australians who hold their wealth in the assets that are underperforming.
Overbuilt apartment markets in major CBDs. Parts of the Sydney and Melbourne apartment markets — particularly in high-rise developments that were targeted at investors and marketed heavily offshore — are experiencing flat or declining values, elevated vacancy rates, and rental yields that have fallen below the cost of debt. The oversupply in these segments is structural and will not be resolved quickly.
Regional markets that boomed on COVID migration and have since corrected. The sea-change and tree-change markets that surged during 2020 and 2021 — when remote work seemed permanent and lifestyle became the dominant purchase motivation — have in many cases given back a significant portion of their gains. Buyers who purchased at the peak, with high leverage, are in some cases underwater.
Prestige markets affected by sentiment and credit availability. The top end of the Sydney and Melbourne markets — properties above $5 million — is sensitive to credit availability, business confidence, and the wealth effect of equity markets. While not in distress, transaction volumes have slowed and vendors are accepting results that would have been disappointing two years ago.
What this divergence means for investors
The practical implications of a two-speed property market are significant — and they run counter to the generic advice that dominates the property investment industry.
Location selection has never mattered more. In a uniform market, a mediocre location could be carried by the rising tide. In a divergent market, location is the difference between capital growth and capital loss. Investors who select locations based on genuine economic fundamentals — population growth, infrastructure, employment diversity, rental demand — will outperform. Those who select based on price alone, or based on historical trends that no longer apply, will underperform.
Yield is not a consolation prize. For too long, Australian property investors have dismissed rental yield as secondary to capital growth. In a higher-rate environment where the cost of holding an investment property is materially greater, yield is not optional — it is the margin between a viable investment and a financial burden. Properties that generate strong rental income in markets with structural undersupply are both safer and more productive than properties bought purely for anticipated capital growth that may or may not materialise.
Development economics vary dramatically by market. As someone who finances development projects across three states, I can tell you that the feasibility of a townhouse project in Adelaide’s northern suburbs looks fundamentally different from the feasibility of a comparable project in Melbourne’s outer west. Construction costs are broadly similar. Land costs differ. But the critical variable is the end value — and end values are diverging as the two-speed market takes hold.
At Renown Lending, we are seeing stronger deal flow from Adelaide and Brisbane than from any other market. The developers approaching us in those cities are building product for which genuine demand exists — not speculating on price appreciation, but responding to measurable undersupply. The quality of borrower, the conservatism of feasibilities, and the strength of exit strategies in these markets reflect their underlying economic health.
The signals to watch
For investors trying to determine which side of the two-speed divide a market sits on, there are several leading indicators worth monitoring.
Rental vacancy rates below 2% indicate genuine supply scarcity. Below 1% indicates a structural shortage that will support both rental growth and capital appreciation.
Population growth above 1.5% per annum indicates a market that is generating real demand — not just recycling existing residents between suburbs.
Infrastructure spending as a percentage of state GDP indicates the level of economic investment that creates lasting employment and amenity improvements.
Building approval volumes relative to population growth indicate whether supply is keeping pace with demand. Markets where approvals are consistently below population-adjusted requirements are the ones most likely to see sustained price growth.
Days on market trending downward indicates a market that is tightening, not loosening. If properties are selling faster than they were six months ago, demand is outpacing supply.
The contrarian opportunity
The two-speed market creates a contrarian opportunity that most investors will miss — because most investors follow momentum rather than fundamentals.
The markets that have already experienced the greatest price growth feel safe. They have track records, media coverage, and social proof. But they may also have fully priced the growth that has occurred, leaving limited upside.
The markets that are earlier in their growth trajectory — where the fundamentals are strong but the price appreciation has not yet fully materialised — offer superior risk-adjusted returns. They feel less exciting. They get less coverage. And they require genuine research rather than headline-following.
Adelaide is, in my admittedly biased view, the clearest example of this opportunity in Australia today. A city with accelerating population growth, generational infrastructure investment, a defence anchor that provides multi-decade economic certainty, and a property market that — despite significant recent growth — remains fundamentally undervalued relative to its economic trajectory.
I am not suggesting that every investor should buy property in Adelaide. I am suggesting that every investor should be making location decisions based on economic fundamentals rather than past performance — because in a two-speed market, past performance is not just unreliable. It is actively misleading.
Kalpi Prasad is the founder of Renown Group Australia, which includes Renown Lending, Renown Wealth, and Renown Mortgages. He is based in Adelaide with offices across Sydney and Melbourne.
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