Australian Property Market Forecast 2026: Prices, Rates, and Outlook

The Australian property market enters 2026 in a complex position. After years of rapid price growth followed by a correction and subsequent recovery, buyers, sellers, and investors are all trying to read the signals. Interest rates, population growth, housing supply shortages, and government policy changes are all pulling the market in different directions.

This forecast breaks down the key factors shaping the Australian property market in 2026, examines price growth expectations by capital city, and highlights the risks and opportunities ahead. Whether you are an investor planning your next acquisition or a first home buyer deciding when to enter the market, understanding these dynamics is essential.

Current Market Conditions

As of early 2026, the Australian property market has largely recovered from the 2022-2023 correction. National dwelling values have surpassed their previous peaks in most capital cities, driven by a severe housing supply shortage, record population growth from immigration, and stabilising interest rates.

However, the recovery has been uneven. Sydney and Melbourne, which experienced the sharpest corrections, have seen moderate but steady growth. Brisbane, Perth, and Adelaide have outperformed significantly, with annual price growth exceeding 10% in some markets through 2025, driven by interstate migration, relative affordability, and strong local economies.

Interest Rate Outlook: The RBA's Path Forward

The Reserve Bank of Australia's cash rate decisions remain the single most influential factor for the property market. After holding rates steady through much of 2025, the RBA began a measured easing cycle in early 2026 as inflation returned closer to the 2-3% target band.

Most economists expect a further 50-75 basis points of rate cuts through 2026, which would bring the cash rate down to around 3.5-3.75%. Each 25 basis point cut increases borrowing capacity by approximately 2-3% for the average borrower, which translates to roughly $15,000-$25,000 in additional purchasing power on a typical mortgage.

The key risk is that rate cuts stall if inflation proves sticky. Services inflation, particularly in housing-related costs like rents, insurance, and construction, remains elevated. The RBA has signalled a cautious approach — they will not rush cuts just because other central banks have moved faster.

Price Growth Predictions by City

Sydney

Forecast: 4-6% growth. Sydney's market is constrained by affordability limits, with the median house price already above $1.4 million. However, undersupply, population growth, and rate cuts will support moderate gains. The Western Sydney Airport precinct and Metro West rail line continue to drive localised growth in Sydney's west.

Melbourne

Forecast: 3-5% growth. Melbourne has been the weakest of the major capitals in the current cycle, partly due to higher land tax settings introduced by the Victorian government and a larger supply pipeline of new apartments. However, Melbourne's relative affordability compared to Sydney (approximately 30% cheaper on median house prices) and strong population growth position it for a catch-up phase.

Brisbane

Forecast: 6-8% growth. Brisbane continues to benefit from strong interstate migration, the 2032 Olympics infrastructure pipeline, and relative affordability. Supply remains tight, with vacancy rates below 1% in many suburbs. The risk is that affordability deteriorates to the point where migration slows.

Perth

Forecast: 6-9% growth. Perth is in the strongest position of any capital city, emerging from an extended downturn that kept prices flat or falling for nearly a decade. The resource sector recovery, severe rental shortage (vacancy rates below 0.5% in some areas), and still-affordable price points are driving rapid growth. Median house prices remain below $800,000, well under Sydney and Melbourne.

Adelaide

Forecast: 5-7% growth. Adelaide has been a standout performer since 2020, with consistent price growth driven by defence industry investment, the submarine program, population growth, and relative affordability. The challenge for Adelaide is sustaining this growth as prices catch up to levels where affordability becomes a constraint.

Hobart, Darwin, and Canberra

Hobart is expected to see modest growth of 2-4% after a period of price correction. Darwin may surprise with 4-6% growth as the resource sector and defence spending drive demand. Canberra, always relatively stable, is forecast for 3-5% growth supported by public sector employment.

Supply vs Demand: The Structural Shortage

Australia's housing supply shortage is the defining structural issue for the property market. The National Housing Accord target of 1.2 million new homes over five years from mid-2024 is widely regarded as unachievable given current construction industry capacity, labour shortages, elevated material costs, and planning approval delays.

At current completion rates, Australia is tracking well below the required 240,000 dwellings per year. Meanwhile, population growth from high net overseas migration (around 400,000-500,000 per year in recent years) continues to drive demand. This fundamental imbalance between supply and demand underpins price growth across most markets.

• New dwelling approvals: Running approximately 15-20% below the levels needed to meet demand
• Construction insolvencies: Builder failures remain elevated, disrupting the pipeline of new homes
• Labour shortages: Skilled trades remain in high demand, pushing construction costs up and timelines out
• Planning delays: Development approval processes in most states take 12-24 months, adding cost and uncertainty

Rental Market Outlook

The rental market remains extremely tight across most of Australia. National vacancy rates sit below 1.5%, and many capital cities have vacancy rates under 1%. Rents have risen 30-50% in many markets since 2020, placing severe affordability pressure on tenants.

In 2026, rental growth is expected to moderate but remain positive at 3-5% nationally. Supply additions from new builds and conversions of short-term rentals back to long-term leases will provide marginal relief. However, the structural undersupply means vacancy rates are unlikely to return to comfortable levels (2-3%) in the near term.

For investors, this means rental income should continue to grow, improving cash flow positions. Use Realestate Lens's property research tools to analyse rental yields and vacancy rates in specific suburbs before making investment decisions.

Key Risks to Watch

No forecast is complete without acknowledging the downside risks. Here are the main threats to the property market outlook for 2026:

• Affordability ceiling: At some point, prices reach a level that buyers simply cannot afford, even with rate cuts. Sydney and some Brisbane markets may be approaching this point.
• Policy changes: Government interventions such as changes to negative gearing, capital gains tax concessions, foreign buyer rules, or stamp duty reform could significantly impact investor demand and pricing.
• Global recession: A significant global economic downturn, particularly one affecting China (Australia's largest trading partner), could reduce employment, migration, and property demand.
• Immigration policy changes: If the government significantly reduces migration intake, the demand side of the housing equation weakens, particularly in rental markets.
• Higher-for-longer rates: If inflation proves persistent and the RBA cannot cut rates as expected, borrowing capacity remains constrained and price growth stalls.

Opportunities for Buyers and Investors

Despite the risks, several opportunities exist in the current market:

• Rate cut tailwind: Falling interest rates increase borrowing capacity and typically drive buyer activity and price growth. Buying ahead of the full rate cutting cycle can position you to benefit from this tailwind.
• Regional markets: Many regional centres offer stronger yields and more affordable entry points than capital cities, with improving infrastructure and lifestyle appeal driving demand.
• Perth and Adelaide: These markets still offer relative value compared to the east coast capitals, with strong fundamentals supporting further growth.
• Infrastructure-linked suburbs: Suburbs along new transport corridors, near new hospitals or universities, or in major urban renewal precincts offer potential for above-average capital growth.

For detailed suburb-level analysis, explore our guide to the best suburbs to invest in for 2026, and use our property investing guide to build a sound investment strategy.

Note: This forecast is based on publicly available economic data, RBA guidance, and market analysis as of early 2026. It is general commentary and not personal financial advice. Property market conditions can change rapidly. Always conduct your own research and consider seeking advice from a qualified financial adviser before making investment decisions.