Australian Property Market: Moderated Growth Expected in 2026
The Australian property market is projected to experience moderated growth in 2026, with experts anticipating a deceleration in the pace of price increases following significant expansion in 2025. While national home prices are expected to reach new highs, potential interest rate increases and varying regional performance are noted factors influencing the market outlook.
Overall Market Outlook for 2026
The Australian property market is anticipated to see moderated growth in 2026, following substantial activity in the preceding year. A deceleration in property price growth is expected.
Anne Flaherty, a senior economist at REA Group, projects that home prices will reach new highs in 2026, although the pace of growth is anticipated to slow.
Conversely, Aaron Scott, co-founder of property technology app bRight, indicated potential challenges for investment properties in 2026. He cited observed signs of weakness in major capital cities and slowed growth in smaller capitals. Scott specified that these observations apply to investment properties and not to homes purchased for owner-occupation.
Key Factors Influencing the Market
Several factors are expected to influence the market throughout 2026:
- Interest Rates: The risk of interest rate increases remains, which could impact borrowing costs. Flaherty noted that no further rate cuts are expected for 2026, with a possibility of rate increases if inflation continues.
KPMG's Residential Property Outlook predicts that price growth is expected to continue even if the Reserve Bank implements a cash rate increase. Rising borrowing costs may contribute to negative growth in certain property sectors.
- Supply and Demand: Limited new housing supply and persistent demand are cited as factors expected to support price growth.
- Government Initiatives: Government-backed initiatives for first-home buyers, including the Australian Government's 5 percent Deposit Scheme, are expected to support market activity, particularly in the more affordable segments.
Market Segment Performance
Performance is expected to vary across different market segments:
- Affordable Market: This segment is projected to maintain activity, supported by government initiatives for first-home buyers, a re-engagement of investors, and sustained demand for budget-friendly properties.
- Higher-Priced Segments: These areas are expected to experience a reduction in growth.
- Investment Properties: Aaron Scott of bRight noted potential challenges for investment properties due to observed weakness in major capital cities and slowed growth in smaller capitals.
Specific City Projections for 2026
KPMG's Residential Property Outlook, released on Wednesday, provides specific price increase forecasts for Sydney and Melbourne in 2026:
- Sydney: House prices are projected to increase by 5.8%, and unit prices by 5.3%.
- Melbourne: House prices are projected to increase by 6.8%, and unit prices by 7.3%.
Preceding Market Performance (2025)
The anticipated moderation follows a period of significant expansion over the past 12 months. This period was characterized by:
- Double-digit house price growth across numerous regions nationwide.
- Strong performance in cities such as Perth, Adelaide, and Brisbane.
- Contributing factors included low housing inventory and a period of declining interest rates.
- National home prices rose by 8.8% year-on-year, with the median home value recorded at $880,000.
- Price growth in 2025 was supported by three interest rate cuts.
Recent Regional Performance (December)
Recent data from PropTrack’s Home Price Index indicated a national increase of 0.1% in December. Regional performance across capital cities varied during this month:
- Adelaide recorded the strongest growth, with prices increasing by 0.8%.
- Brisbane and Perth each experienced a 0.5% growth.
- Sydney and Melbourne experienced a 0.3% decline in home prices.
- Canberra saw a 0.2% dip in prices.