Australian Property Market Outlook 2026: Prices, Rates & Predictions

The Australian property market enters 2026 with a complex set of dynamics. After a strong recovery in 2023-2024 and a period of moderation in 2025, the outlook for 2026 depends on the interplay between interest rates, housing supply, population growth, and affordability constraints. In this analysis, we examine the key factors shaping the market and provide our outlook for prices, sales volumes, and lending activity across the major capital cities and regions.

National Price Trends

National dwelling values grew by approximately 4 to 6 per cent during 2025, a significant slowdown from the 8 to 10 per cent growth seen in 2024. The moderation reflects the ongoing impact of elevated interest rates, affordability constraints (particularly in Sydney and Melbourne where median prices have stretched well beyond $1 million), and a gradual improvement in housing supply. Entering 2026, the rate of price growth is expected to moderate further in the first half of the year, with potential for a modest acceleration in the second half if the RBA delivers rate cuts. Our base case forecast is national price growth of 3 to 5 per cent for the full year 2026, though there will be significant variation across cities and regions.

Capital City Outlook

Sydney

Sydney's median dwelling value sits around $1.15 million, making it the most expensive capital city market. Price growth in Sydney has slowed notably, with quarterly growth rates approaching zero in late 2025. Affordability is a significant constraint, with the average mortgage repayment consuming a record share of household income. For 2026, we expect Sydney price growth of 2 to 4 per cent, driven primarily by the premium and upper-quartile segments where buyer demand remains relatively resilient. First home buyers in Sydney face significant affordability challenges, though government schemes (such as the First Home Guarantee with its $900,000 price cap) provide some support.

Melbourne

Melbourne has been the underperformer among major capitals, with modest price growth through 2025. Higher listing volumes, the impact of land tax changes, and the most aggressive apartment construction pipeline in the country have all weighed on prices. The median dwelling value is approximately $780,000. For 2026, we forecast price growth of 2 to 3 per cent in Melbourne, with apartments likely to underperform houses due to oversupply in some inner-city areas. Melbourne presents arguably the best value of any major city for buyers willing to look beyond the inner ring.

Brisbane

Brisbane has been one of the strongest performers in recent years, benefiting from interstate migration, relatively lower price points, and infrastructure investment associated with the 2032 Olympics. The median dwelling value is approximately $810,000. We expect Brisbane to deliver 4 to 6 per cent growth in 2026, supported by continued population inflows and a relatively tight rental market. However, the gap between Brisbane and Sydney prices has narrowed significantly, which may moderate the migration-driven demand that has been a key growth driver.

Perth

Perth has experienced a remarkable turnaround, with strong price growth driven by resource-sector employment, interstate migration, and extremely low rental vacancy rates. The median dwelling value is approximately $750,000. We forecast Perth growth of 5 to 7 per cent in 2026, making it the strongest-performing capital city market. The supply pipeline in Perth is limited, with construction activity failing to keep pace with demand. This supply-demand imbalance is expected to persist through 2026.

Adelaide

Adelaide has also been a strong performer, with affordable entry points and improving economic conditions supporting demand. The median dwelling value is approximately $730,000. We expect growth of 4 to 6 per cent in 2026.

Hobart, Canberra, and Darwin

Hobart and Canberra are expected to see modest growth of 1 to 3 per cent, while Darwin could see stronger growth of 3 to 5 per cent supported by resource-sector activity.

The Interest Rate Factor

Interest rates are the single most influential variable for the property market outlook. Financial markets are pricing one to two RBA rate cuts during 2026, with the first cut most likely in the second half of the year. Historically, rate cuts have a powerful psychological effect on the property market, even before they translate into material repayment savings. The anticipation of lower rates encourages buyers to enter the market, increases auction clearance rates, and supports price growth. However, the impact of rate cuts will be moderated by the fact that rates remain significantly above the pandemic-era lows. A cut of 25 to 50 basis points from current levels still leaves rates well above the levels that fuelled the 2020-2021 boom. This means the current cycle is likely to produce moderate rather than explosive price growth.

Housing Supply

The federal government's target of 1.2 million new homes over five years (from July 2024) is a critical long-term factor. However, construction activity has been hampered by high building costs, skilled labour shortages, and project delays. Actual housing completions are running well below the required pace to meet the target. This supply shortfall is a key reason why prices remain elevated despite affordability pressures. Until construction catches up with demand, the structural undersupply of housing in Australia will continue to put a floor under prices.

Rental Market

The rental market remains extremely tight across most capital cities, with vacancy rates below 2 per cent nationally. Rents have increased by 8 to 12 per cent annually over the past two years, though the pace of growth is moderating. For property investors, strong rental yields combined with potential for modest capital growth make 2026 a relatively attractive entry point, provided financing costs are manageable. The rental supply shortage is unlikely to be resolved in the near term, supporting investor returns.

What This Means for Buyers

For prospective buyers, 2026 presents a window of relative stability before potential rate cuts stimulate increased demand in the second half of the year. Buying in the first half of 2026, before rate cuts materialise, may allow you to secure a property before competition intensifies. For existing homeowners considering selling, the market is expected to remain supportive of prices across most cities, though the days of rapid double-digit growth are behind us for now. For those looking to refinance, the stable rate environment provides an opportunity to lock in competitive rates, with the added benefit that any rate cuts later in 2026 will further improve your position if you are on a variable rate. Regardless of your plans, getting tailored advice from a mortgage broker who can assess your specific borrowing capacity and compare loan products across multiple lenders is always the smartest starting point.