Australian housing market trends to watch in 2026

The property market is one of Australia's favourite topics of discussion. More than two thirds of our household wealth is tied up in residential property, after all - approximately $11.7 trillion worth.

Whether you're considering the prospects of your real estate portfolio or anxious to get your foot on the property ladder, you probably want an idea of how the market will perform in the coming months.

Here's what you need to know about how things went in 2025 and the trends that could define the market this year.

See also: Median house prices around Australia: Updated monthly

How did the Australian housing market perform in 2025?

House prices have been in a rampage in Australia in recent years, and 2025 was no different. The Australian property market continued to perform, driven by the mid-sized capital cities in particular.

December 2025 saw the Cotality Home Value Index (HVI) rise 1% month-on-month, with values lifting 2.4% in Perth and 1.9% in both Brisbane and Adelaide.

Cotality Research Director Tim Lawless said the uptick in the smaller capitals was a reflection of continuously strained supply, while affordability might be capping price growth in Sydney.

"Over the past three months, most of the state capitals have seen values across the lower quartile of the market rising the fastest," he said.

"Melbourne, where housing affordability isn't quite as stretched, is the one exception, with the city's broad middle of the market is seeing the fastest lift in values."

Overall, prices rose 7.5% through the year to 30 November, but there was a huge amount of variance in markets. Darwin (up 17%), Perth (up 13.1%), Brisbane (up 12.8%), were the standout capital city performers. Meanwhile, Adelaide property rose 8.2%, that of Sydney lifted 5.1%, and Hobart (up 4.7%), Melbourne (up 4.2%), and Canberra (up 4.2%) trailed.

Another notable development occurred in regional markets, which outperformed the capitals, growing 8.6% through the year to November compared to the combined capitals' 7.1% increase.

Australian housing market: Trends to watch in 2026

According to the experts, these are some trends to watch out for in the property market this year.

1. Improved access and rising incomes to drive growth

New and expanded pathways into the market, combined with rising household incomes, are expected to see more Australians purchasing properties in 2026, and spending more to do so.

The 5% Deposit Scheme was expanded in late 2025, allowing first home buyers and single parents to enter the market with deposits of 5% or 2% respectively without paying lenders mortgage insurance (LMI), no matter their income. The only major restriction being comparatively generous price caps. The Help to Buy shared equity scheme also launched towards the year's close, while lower interest rates and modest wage growth is helping buyers spend more.

All this will likely drive momentum in the property market, according to forecasting by Domain, which will likely come at a cost to homebuyers, McGrath founder and CEO John McGrath warns.

"I know governments are well-intentioned with first home buyer incentives, but here's the uncomfortable truth: these demand-side solutions are providing nothing more than a sugar hit to home values," he said.

2. Affordability challenges to limit price growth

Property prices roared higher once more in 2025, and there's little relief in sight for those struggling to get into the market. However, one silver lining is that anyone in such a situation is far from alone, and with numbers comes power.

Experts predict property price growth will moderate in the back end of 2026 as affordability pressures weigh on buyers. This is particularly likely to be the case in the midsized capital cities, Domain noted.

"With FOMO running hot in the boom time cities of Brisbane, Perth and Adelaide, they are likely to remain the strongest over the next six months," AMP head of investment strategy and chief economist Shane Oliver said.

"But as their relative affordability continues to deteriorate, with home price to income ratios in each city now being well above that in Melbourne, some sort of rotation back to the laggards including Melbourne and possibly Sydney is likely at some point later next year."

3. Interest rate uncertainty may dampen property hopes

The path forward for the RBA is particularly uncertain at the time of writing. While most major economists appear to agree a prolonged cash rate pause looks to be the most likely scenario, some (including Westpac chief economist Luci Ellis) forecast rate cuts in 2026. Others (like NAB chief economist Sally Auld) warn the central bank's February meeting could bring a rate hike.

Meanwhile, the positive impact three 2025 rate cuts had on many households' borrowing power has already been eaten up by positive price movement. The median household can borrow $55,000 more thanks to the rate cuts, but the median dwelling value has also risen around $60,000, Cotality notes.

"With inflation once again above the RBA's target range and rates potentially on hold for the foreseeable future, it's likely housing sentiment will suffer," Cotality research director Tim Lawless said in December.

"With housing affordability already stretched and worsening, it stands to reason that fewer borrowers will be able to access credit as serviceability barriers become more prominent."

4. Potential regulator crack down on property investors

APRA revealed plans to limit the amount of new lending flowing to property buyers purchasing with debt-to-income ratios of more than six in late 2025. The new controls will come into effect in February.

The regulator doesn't expect the change to have a major impact, but notes the investor market is more likely to be affected than the owner-occupier market.

Perhaps the change could leave a larger dent in sentiment than anything else, with Dr Oliver noting it could end up being the first of several measures APRA has the scope to introduce.

"It's clearly a pre-emptive move designed to cool investor activity before it gets too hot," he said.

"If it doesn't work - and some borrowers may try to get in ahead of the cap becoming binding, so it could boost investor lending in the near term - APRA is likely to do more like putting a cap on investor credit growth like the 10% year-on-year cap it applied in late 2014.

"On this front, note investor lending is already running at a pace in excess of 10%, which suggests a high risk that APRA will do more to slow down riskier forms of home lending that it fears may create financial stability risks."

5. Record house prices predicted for 2026, units tipped to outperform

Ultimately, though, 2026 looks likely to be another year of property price increases, but perhaps not to the extent that 2025 proved to be.

"Australia's housing market is set for another strong year, with demand still high and buyers continuing to chase affordability, particularly in the unit market, which is expected to outperform in several cities," Domain chief of research and economics Nicola Powell said.

The listing platform forecasts capital city house prices to lift 6% in 2026 and capital city units to rise 5%.

"There are encouraging signs on the horizon, with new housing supply starting to come to market as building activity picks up," Dr Powell said.

"While prices and rents will remain elevated, slower population growth, rising incomes and a cautious RBA should help the market move toward more balanced conditions by the end of 2026."

AMP's forecast is similar, suggesting property prices could grow by between 5% and 7% in the new year.

Looking to start 2026 out on the right foot? Check in with your home loan

Financial success starts with preparation, and one way to consider setting yourself up for a financially healthy 2026 is to review your home loan.

Now could be the ideal time to assess whether your current mortgage is still meeting your needs. If it's not, it might be time to explore more competitive options that better suit your financial goals.

Here are some of the most competitive home loans available right now:

Important Information and Comparison Rate Warning

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