What’s Next for Aussie Real Estate?
2026 Housing Market Forecast Just Dropped

Australia’s real estate landscape is entering a new phase in 2026, buoyed by a complex blend of opportunity and challenge. As interest rates begin to fall, supply remains tight, and population growth still fuels demand, but buyers, investors, and homeowners alike face a market shaped by shifting affordability, policy intervention, and evolving economic headwinds. This article breaks down the latest housing market forecast for 2026, exploring the forces at work, where prices are heading, the outlook for various cities and housing types, and how strategic decisions may make all the difference in the years ahead.

The Big Picture: Australia’s 2026 Property Outlook

Continued Growth, Subtler Upswing

Forecasts for 2026 reveal ongoing growth in property prices across most of Australia’s capital cities. Unlike the rapid climbs of the pandemic years or the post-lockdown rebound, this new upswing is expected to be more measured—a result of gradual interest rate reductions, persistent supply shortages, and targeted government supports, counterbalanced by stretched affordability and a more cautious consumer sentiment.

Key drivers include:

• Lower borrowing costs following June 2025’s second RBA interest rate cut, with expectations for two to three more by early 2026.
• Chronic dwelling undersupply: New construction lags population growth, stoking both rental and purchase market competition.
• Government initiatives: Expanded schemes for first-home buyers and tax incentives keep demand buoyant.
• Slower migration: Eases—but does not solve—supply pressure.
• Affordability ceiling: Price growth is constrained in cities where buyers already face high mortgage-to-income ratios.

National Price Forecasts at a Glance

Source: Domain Price Forecast Report FY25-26, KPMG, SBS News

What’s Driving Price Growth?

1. Interest Rate Cuts Return

• The Reserve Bank of Australia delivered two rate cuts in 2025, lowering mortgage rates and boosting sentiment.
• Further cuts are forecast, improving borrowing capacity and drawing more buyers, especially at the premium end of the market.
• Investor demand is rebounding, seeking opportunities before rates bottom out and competition intensifies.

2. Supply Shortage Remains Dire

• Years of underbuilding and slow project approvals mean dwelling completions fall far short of population needs.
• Construction is improving slightly, but most experts agree that Australia will miss national new home targets for years to come, keeping supply tight throughout 2026.
• High material costs, labor shortages, and planning delays continue to hold back near-term progress.

3. Population & Migration

• While net overseas migration and population growth will slow somewhat from their 2023-2024 peak, overall demand remains robust, especially in Sydney, Melbourne, and Perth.
• Rental markets remain especially tight, with sub-1% vacancy rates common in most capitals.

4. Policy & Incentives

• Federal and state governments have expanded first-home buyer programs, eased deposit requirements, and enabled new lending policies.
• Policies target boosting construction and making ownership attainable in more affordable markets, but relief for upgraders, investors, and new entrants is mixed.

5. Affordability Squeeze

• Wage growth is not keeping pace with property prices in most capital cities.
• Some households are reaching their borrowing and repayment capacity ceilings, naturally slowing demand in the most expensive markets and prompting buyers to consider apartments or more affordable cities.

City-by-City 2026 Market Forecasts

Sydney

• Forecast Growth: Leading the nation with 7% house price growth to a new median of $1.83M.
• Drivers: Deep demand, international investment, and more buyers returning as rates fall. Affordability limits are stretching even high earners.
• Challenges: Buyer pool narrows as cost-of-living pressures persist, and deposit hurdles remain very high.

Melbourne

• Forecast Growth: 6% house price gain to $1.11M; units up 5% to $584,000.
• Drivers: Rebounds from a flat 2024; demand steady, with inner suburbs and townhouses outperforming.
• Trends: Increasing shift towards well-located apartments and family-friendly units as affordability wanes in the housing market.

Brisbane

• Forecast Growth: 5% price rise for houses and units, pushing both to new highs.
• Drivers: Strengthening population inflows, infrastructure investment, and still-comparative affordability.
• Slowing Momentum: After two years of double-digit rises, growth is moderating but remains healthy.

Adelaide

• Forecast Growth: 4% gain for both houses and units; previously, it was the strongest capital in 2024.
• Trends: Some cooling following sustained outperformance; more buyers are priced out, and migration slows.

Perth

• Forecast Growth: 5% for houses to $982,000; 6% for units, potentially breaking the million-dollar median barrier by late 2026.
• Drivers: Population growth (strongest in Australia), high incomes, and still-moderate entry prices fuel the momentum.
• Risks: Growth slows as affordability narrows and migration inflows ease, but remains a star performer.

Canberra

• Forecast Growth: 4% for houses, 3% for units; remains below its 2022 price peak.
• Trends: Improved affordability relative to other capitals attracts both local and interstate movers.

Units vs. Houses: Shifting Trends for 2026

One of the defining features of the 2026 property market will be the narrowing gap between house and unit price growth:

• Unit prices are tipped to outpace houses in several capitals for the first time, with KPMG forecasting unit values climbing 5.5% compared to 6% for houses, as buyers opt for more affordable entry points.
• The “family-friendly apartment” phenomenon: More buyers—especially in inner/middle suburbs—are trading space for accessibility.
• Townhouses and villa units are increasingly viewed as a compromise between size and price, especially in Sydney and Melbourne.
• Regional market growth is expected to lag city markets after a pandemic-era boom.

Rental Markets & Yield: The Investment Landscape

• Vacancy rates continue at ultra-low levels (<1.5%) in most capitals, sustaining high rent growth.
• Yields are improving as rent increases outpace property price growth, especially in traditionally low-yield cities like Sydney and Melbourne.
• Investor activity is rebounding; however, compliance costs, taxes, and regulatory uncertainty weigh on sentiment.

Risks, Limitations & Headwinds

1. Affordability

• Buyers face record deposit and income requirements in most capitals; some owner-occupiers and first-home buyers are being priced out, which could slow price growth if rates or economic conditions worsen.

2. Policy, Regulation, and Tax

• Changes to property-related taxes, tenancy laws, and stricter compliance standards could add further cost and complexity for investors, especially in Victoria and NSW.
• Supply-side government policies are taking time to ease the fundamental shortage.

3. Economic & Geopolitical Uncertainty

• Rising global and domestic economic headwinds, as well as ongoing cost-of-living pressures, could dent consumer and investor confidence.
• Any reversal in the interest rate outlook would have an immediate impact.

2026: Strategic Investor Takeaways

• Location is more critical than ever: The gap between outperforming and underperforming suburbs continues to widen. Focus on inner/middle-ring, amenity-rich, gentrifying locations.
• Units and townhouses offer value: As houses become increasingly unaffordable, well-located apartments and medium-density homes experience increased demand and stronger capital growth prospects.
• Rental returns are improving: Ongoing undersupply is pushing yields higher, particularly in previously low-yielding markets.
• The window for value buying is narrowing: Early movers are rewarded as sentiment shifts with rate cuts and more buyers re-enter the market.
• Risk management: Be wary of oversupplied fringe estates and high-rise CBD apartments, which continue to underperform.

Frequently Asked Questions

Will the market continue to rise in 2026?

Yes, most commentators expect a steady, sustainable upswing through 2026, led by Sydney and Melbourne. However, gains will be more modest than recent years, and the pace of price growth pace will differ by location and property type.

Is now a good time to buy a property?

With strong long-term fundamentals, below-peak interest rates, and improving rental yields, strategic investors see 2026 as a promising entry point—especially for those seeking quality assets in tightly held suburbs.

Where is the biggest opportunity?

• Sydney and Melbourne for long-term capital gain and resilience.
• Perth for upside if affordability holds.
• Family-oriented apartments and townhouses in gentrifying, infrastructure-rich areas of all capitals.

Conclusion: Ready or Not, Australia’s Next Chapter Has Begun

Australia’s housing market is poised for gradual, broad-based gains throughout 2026, anchored by enduring supply shortages, resurgent buyer demand, and the supportive tailwinds of rate cuts and policy interventions. While affordability now creates ceilings in some cities and risk management is more critical than ever, strategic investors who focus on high-quality, well-located assets will be best placed to benefit from the next wave of growth.

Monitoring local market conditions, staying informed on regulation, and seeking robust finance strategies will be keys to navigating this increasingly complex but rewarding property landscape.

Key sources:

• com.au/australian-property-market-predictions
• Domain Price Forecast Report 2025-26
• KPMG Residential Property Market Outlook 2025-26
• SBS News: 2026 house price projections
• Smart Mortgage Broking: 2026 gains forecast

All major figures and projections sourced from referenced July 2025 reports, analyses, and expert commentary to ensure the most up-to-date and reliable forecast available.