Australian Property Market 2026: What Investors Need to Know

2025 delivered another strong year for Australian property, with national dwelling values rising 8.6% and adding roughly $71,400 to the median home value. But as we head into 2026, the market is shifting. The tailwinds that drove last year's growth are fading, and investors need to be more selective about where and how they invest.

Here's what happened, what's ahead, and what it means for your portfolio.

How 2025 Played Out

The national headline figure tells one story, but the real picture is more nuanced. Performance varied dramatically depending on where you were invested.

Source: Cotality Home Value Index, 31 December 2025

Regional markets collectively outperformed the capitals, rising 9.7% compared to 8.2% for combined capital cities. Western Australia's regional areas were particularly strong, with many local government areas posting mid-to-high teens growth. Regional Queensland wasn't far behind, with most areas delivering double-digit returns.

The top performers nationally were affordable regional locations like Albany in WA, Port Augusta in SA, Townsville and Mackay in QLD, and Mildura in Victoria — all recording around 20% growth.

What Drove the Growth

Four key factors combined to push values higher in 2025.

First, the RBA delivered three interest rate cuts through the year. This boosted borrowing power and, perhaps more importantly, lifted buyer confidence after a prolonged period of rate uncertainty.

Second, supply remained critically tight. Over the past decade, the total number of properties listed for sale nationally has dropped by 33% — from 339,000 to just 228,000 — while the population grew by 8 million people. Construction delays and elevated building costs meant new supply couldn't keep pace with demand.

Third, strong net overseas migration continued to fuel housing demand, particularly in rental markets where vacancy rates sat near record lows.

Fourth, affordability pressures reshaped buyer behaviour. With prices stretched in premium markets, demand shifted toward more affordable price points, units, and regional areas where buyers could still service a mortgage.

What the Forecasters Are Saying About 2026

Most major research houses are predicting continued growth in 2026, though at a more moderate pace.

There's some disagreement on which cities will lead. Domain tips Sydney and Melbourne to accelerate from their softer 2025 performance, while others expect Perth, Brisbane and Adelaide to maintain their momentum given stronger underlying economies.

One theme is consistent: 2026 is shaping up as a year of two halves. The first half is expected to see strong activity as pent-up demand flows through, followed by a slower second half as affordability constraints start to bite.

The Interest Rate Question

This is where things get uncertain.

Most bullish forecasts assume interest rates will remain stable or fall further. But that's not guaranteed. Inflation has proven sticky, and some economists now believe the next RBA move could be up rather than down. As of early January, futures markets were pricing in a 36% chance of a rate increase at the February RBA meeting.

My view is this: whether rates go up or not, unless inflation eases we should expect our pockets to be lighter in 2026. The prudent approach is to keep a close eye on cashflow this year. If rates do increase, it's worth reviewing your loans to see if there's anything we can do to reduce the impact — whether that's refinancing, renegotiating pricing, or restructuring.

Understanding the Multi-Speed Market

One of the most important concepts for investors to grasp is that there is no single "Australian property market." There are hundreds of micro-markets, each performing differently based on local conditions.

In 2025, Darwin grew 18.9% while Melbourne managed 4.8% — a 14 percentage point gap between capital cities. Within regional areas, some locations in WA surged 40% while others in NSW and NT fell by more than 10%.

Even within cities, performance varied. Upper quartile properties underperformed lower quartile properties in every capital, as affordability constraints pushed demand toward more accessible price points.

This matters because blanket statements about "the market" don't apply. When someone asks whether now is a good time to buy, the answer depends entirely on where specifically they're looking and what the local fundamentals are.

Trends to Watch in 2026

Several themes are likely to shape the market this year.

Affordability will continue driving buyer behaviour. Expect demand to remain strongest in lower-to-mid price segments, with units potentially outpacing houses in markets like Brisbane, Adelaide and Perth where detached housing has become unaffordable for many buyers.

Government schemes will add fuel. The expanded First Home Guarantee allowing purchases with a 5% deposit, and the new Help to Buy scheme with government equity contributions, will bring more first-home buyers into the market. History suggests these schemes increase demand more than they increase supply, which supports prices in eligible price brackets.

Supply constraints will persist. Construction activity remains challenged by high costs and labour shortages. Don't expect meaningful relief from new stock in 2026.

Regional markets will stay relevant. While capitals tend to outperform over the long term, affordable regional areas with diversified economies and strong employment bases will continue attracting buyers priced out of metro markets.

What This Means for Investors

In a multi-speed market with rate uncertainty, three things matter most.

If you're considering your next purchase or want to review how your portfolio is positioned for 2026, feel free to reach out. I'm happy to run through the numbers with you.