The Australian housing market is witnessing a fundamental restructuring, characterised by the emergence of distinct price bands and the formation of what could be termed the "Golden Arc."

Just as with the luxury house market, Sydney continues its solitary ascent with a geometric mean house price of $1.59 million. Sydney's divergence from other markets has intensified, with the price gap to Melbourne expanding from 30 per cent in 2014 to 55 per cent in 2024. This widening chasm indicates a "two-speed" market, where Sydney operates under distinct market dynamics from the rest of the country.

Meanwhile, Queensland's coastal markets have been experiencing remarkable growth to converge right behind Sydney. The Gold Coast and Sunshine Coast have established themselves as Australia's second and third most expensive housing markets, with remarkably similar geometric mean house prices of $1.18 million and $1.14 million respectively. Both regions have also witnessed an identical 76per cent increase in prices over the past five years. Notably, the Gold Coast overtook Melbourne in 2022, followed by the Sunshine Coast surpassing Melbourne in 2023. Brisbane, while still more affordable at a geometric mean house price of $996,000, is also showing signs of joining its coastal counterparts to complete the Golden Arc. The city has the second-highest five-year growth rate of 83.5per cent, trailing only Adelaide.

In contrast to the upward trajectory of the Golden Arc, Melbourne's housing market has seen a significant decline. Once the second most expensive market in the country, Melbourne now sits fourth, with a geometric mean house price of $1.02 million. Over the past five years, Melbourne's price growth has been the slowest among major cities, at just 20.6per cent. Given these trends, it seems unlikely that Melbourne will return to the top three markets anytime soon.

Instead, Melbourne’s stagnation paves the way for a potential shift in the mid-market, with Perth ($882,000) and Adelaide ($877,000) now within a 17per cent price range of Melbourne. Five years ago, these markets were spread across an 80per cent price range. This compression suggests that Perth and Adelaide may soon overtake Melbourne in terms of house prices, further contributing to the formation of a distinct mid-market cluster between $850,000 and $1 million.

In summary, we can expect several key developments. Perth and Adelaide may surpass Melbourne in price, reinforcing the shift in the mid-market cluster. The Golden Arc is likely to emerge with Brisbane joining the Gold Coast and Sunshine Coast as premium markets. Finally, Sydney's isolation at the top is expected to widen, further emphasising the "two-speed" nature of the market.