Traditionally cheaper than Sydney and Melbourne, the mid-tier capitals of Perth, Brisbane and, to a lesser extent, Adelaide have had their housing affordability advantage eroded as their rate of home building lagged population growth.
Latest analysis, released by property data firm Cotality on Friday, confirmed the link between supply and affordability as state and federal governments attempt to build their way out of the housing crisis.
Of Australia's five major housing markets, Victoria has built new homes at a faster tick than the other states since the outbreak of COVID-19, resulting in prices growing at a much slower rate than the national average.
About one-in-three new homes completed in Australia between the start of 2020 and September 2025 were built in Victoria, despite the state accounting for less than a quarter of Australia's population growth over the same period.
Over the same period, prices grew by 16 per cent, compared to nationwide growth of 55 per cent.
"Policy support at both the state and federal level assisted the growth in Victorian dwellings over this period," Cotality head of research Gerard Burg said.
Property values in Perth surged an eye-watering 92 per cent - the largest jump of the major capital cities.
Simultaneously, Western Australia completed the lowest share of new dwellings (nine per cent) relative to population growth (17 per cent).
Queensland accounted for more than a quarter of Australia's population growth, but less than one-fifth of new dwelling supply.
Brisbane's median dwelling value rose 91 per cent.
"Overall, when we see a supply-demand imbalance such as those in Perth or Brisbane, we wind up with a large pool of buyers competing for a small pool of dwellings," Mr Burg said.
"This creates a seller's market and can rapidly drive up home values, as we saw in these two capitals."
Peter Tulip, chief economist at the Centre for Independent Studies, said the relationship between supply and pricing was also evident in housing markets in the US and New Zealand.
By relaxing zoning regulations and greatly increasing the amount of medium density allowed to be built in Auckland, researchers estimated housing stock increased by four per cent, reducing rents by 28 per cent relative to other comparable cities in New Zealand.
"This has very important policy implications, which is that if we increase housing supply, housing will become more affordable," Dr Tulip told AAP.
Dr Tulip said the NSW and Victorian governments led the way in liberalising zoning rules to increase supply, but it would still be months before their reforms, put in place one-to-two years ago, began to bear fruit.
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