Australia’s property market is about to enter one of its most interesting phases in years. If you’re a first home buyer in Sydney, an investor eyeing your next purchase, or a homeowner considering refinancing, understanding property market trends heading into 2026 can be your path to making smarter financial decisions.
Here’s what you need to know: the market’s not crashing, but it’s not ripping either. We’re looking at steady, sustainable growth with some cities performing significantly better than others.
Quick Answer: What’s Happening in 2026
- Capital city house prices forecast to rise 6-10% nationally, with Sydney and Melbourne leading at 7% and 6% respectively
- Perth, Brisbane and Adelaide will see 4-12% growth, but affordability constraints are starting to bite
- Regional markets are expected to underperform capital cities over the long term
- Interest rate cuts and the expanded First Home Guarantee Scheme will drive demand in the first half
- Growth expected to moderate in the second half as affordability limits kick in
- Rental vacancy rates below 1.5% will keep rents climbing across major cities
Understanding 2026 Property Market Trends
The housing market forecast for 2026 tells a story of two distinct phases. According to Domain’s Property Forecast Report, the first half of the year will see strong momentum driven by interest rate cuts and policy support, while the second half is expected to slow as affordability constraints re-emerge.
What does this mean for you? Timing matters more than it has in years.
Sydney’s median house price is projected to hit $1.92 million by the end of 2026, representing a 7% increase. For first home buyers, that’s an extra $112,000 added to the price tag in just 12 months. But here’s the thing, this growth won’t be linear. The strongest price rises are expected between January and June, before affordability pressures slow things down.
Melbourne is staging a full recovery, with forecasts suggesting the median will reach $1.17 million as the city fully rebounds from its pandemic downturn. After years of underperformance, Melbourne represents a genuine opportunity for buyers who’ve been priced out of Sydney.
Why Capital Cities Are Outperforming Regional Areas
We’re seeing a clear shift back to capital city dominance. While regional property markets boomed during COVID as people escaped lockdowns and embraced remote work, that trend is reversing.
Capital city property markets have historically outpaced regional areas over the long term, and this trend is expected to continue. Why? Three main reasons: infrastructure investment is concentrated in capitals, overseas migration flows directly into major cities, and employment opportunities remain strongest in metropolitan areas.
For property investors, this matters. Regional property growth might look tempting with lower entry prices, but capital cities typically deliver better long-term capital growth. That’s not to say regional markets are a bad investment, but your strategy needs to match your goals.
The Cities Leading Australia’s Housing Market Forecast
Perth: The Underdog Story
Perth is the surprise standout performer. The median house price is forecast to reach $982,000 by June 2026 and cross the $1 million mark by the end of the year, joining the million-dollar capital club.
What’s driving Perth’s growth? Strong commodity prices supporting the mining sector, the highest population growth of any capital city, and, importantly, affordability. Perth residents face a lower mortgage-to-income ratio compared to eastern states, giving buyers more flexibility.
Brisbane and Adelaide: Moderating but Still Strong
Brisbane and Adelaide have been the darlings of the property market for several years, but their rapid growth is moderating. SQM Research’s Boom and Bust report predicts Brisbane could see 10-15% growth and Adelaide up to 14% under optimistic scenarios, though base case forecasts are more conservative at 5% and 4% respectively.
The reason for moderation? Affordability constraints are intensifying in Brisbane, Adelaide and Perth after several years of aggressive price growth pushing borrowing capacity to its limits.
For first home buyers, this creates a challenging dynamic. These cities were once the affordable alternatives to Sydney and Melbourne, but that value advantage has significantly eroded.
Property Hotspots: Where Regional Growth is Happening
If you’re considering regional property growth as part of your investment strategy, certain areas are standing out.
South-East Queensland Corridor
The Sunshine Coast continues to attract buyers from Sydney and Melbourne seeking a relaxed lifestyle without sacrificing capital growth potential. Industry research identifies the Sunshine Coast and Inner Brisbane as high-potential regions due to ongoing infrastructure spend and migration trends.
The Gold Coast is experiencing similar dynamics. Brisbane families are relocating for better value and lifestyle, while beachside suburbs like Broadbeach and Burleigh Heads are seeing strong demand from lifestyle-driven buyers.
Regional Western Australia
Mining regions in WA are delivering exceptional rental yields. In Port Hedland, a 3-bedroom home priced around $500,000 to $600,000 can generate $900 to $1,200 per week, delivering yields exceeding 8%. Compare that to Sydney’s 3-4% rental yields and the appeal becomes clear for cash flow-focused investors.
Northern Adelaide
Adelaide’s entry-level suburbs are performing well. KPMG’s Residential Property Market Outlook recorded Adelaide as having the biggest house price growth in the country last year, with a 10.1% rise, beating both Perth and Brisbane.
What’s Driving the 2026 Market
Interest Rate Cuts
The Reserve Bank has already cut rates by 50 basis points in 2025, with markets expecting another 80 basis points in cuts by mid-2026. Each rate cut improves borrowing capacity, allowing buyers to borrow more for the same repayment amount.
First Home Guarantee Scheme Expansion
The expanded First Home Guarantee Scheme is expected to be the single most influential demand driver in 2026. The scheme now allows eligible first home buyers to purchase properties up to $1.5 million in Sydney with just a 5% deposit, without paying lenders’ mortgage insurance.
Supply Constraints
Australia’s housing shortage isn’t resolving in 2026. While some new construction is coming online, delays from labour shortages and planning hold-ups mean delivery remains slow. PropTrack recorded 7.4% house price growth nationally over the past 12 months, with prices nearly doubling in Brisbane, Adelaide and Perth over five years.
Should You Buy, Invest, or Refinance in 2026?
This is where your mortgage broker becomes essential. The property market trends point to continued growth, but your personal circumstances dictate strategy.
- For First Home Buyers in Sydney: If you’re ready to buy and can access the First Home Guarantee Scheme, the first half of 2026 offers better conditions than waiting. Consider units and townhouses if houses are out of reach.
- For Property Investors: Capital city properties in supply-constrained areas with strong rental demand make sense for long-term growth. Your broker can give you detailed information on rental yield and investment loans.
- For Homeowners Looking to Refinance: With rates falling and intense competition among lenders, refinancing could save thousands annually. Many homeowners are sitting on rates 1-2% higher than what’s available today simply because they haven’t reviewed their position.
Getting Your Finance Right
Whether you’re buying your first home in Sydney’s competitive market, adding an investment property to your portfolio, or refinancing to reduce repayments, having an expert guide your finance strategy helps you make the most of the housing market forecast for 2026.
Our team at MXJ Finance specialises in helping Sydney buyers, investors, and homeowners navigate complex property markets. We’ll assess your situation, explain your borrowing capacity, and find the right loan structure for your goals, whether that’s getting into the market, expanding your portfolio, or securing a better rate. The property market trends suggest 2026 will reward those who act strategically with the right financial foundation.
