Property Market Outlook - June 2026

It is expected home prices will finish 2026 largely flat across the combined capitals, as higher interest rates and strained affordability see soft to falling prices through the back half of 2026, before a turning point and return to growth late in the year and into 2027.

The changes in the Federal Budget, and the consequent reduction in investor demand, will weigh on growth in 2026 and 2027. Estimates suggest that, over the long-run, home prices will be a few percent lower than otherwise. That translates into slowing home price growth in 2026 and 2027 by a couple of percentage points.

This forecast assumes little change in the cash rate over the second half of 2026. Market expectations have a roughly fifty-fifty chance of one further hike by December. However, that will depend on how inflation continues to evolve, which is particularly uncertain with inflation expectations remaining elevated despite recent falls in oil prices. If rates were to move higher, in response to higher inflation, that could weigh on home prices.

Housing market conditions have cooled in Sydney and Melbourne in 2026, though activity has remained strong. Auction clearance rates have declined in both cities across 2026 as rates have risen, though volumes have been strong. New listings over the first five months of 2026 were up 6-7% annually in both cities, which has given buyers more choice and likely contributed to softer prices and clearance rates at the margin as well.

In contrast, activity in other capitals has been more subdued, limiting choice for buyers and supporting home price growth.

Working in the other direction, housing demand will continue to be supported by population inflows and income growth, as well as boosted demand from first-home buyers, owing to the expanded Australian Government 5% Deposit Scheme.

On the supply side, new residential construction remains soft. While leading indicators, like building approvals and commencements, have been trending in the right direction for the past couple years, actual completions remain low. With rates rising, new commencements may well slow, and that limited flow of new homes will continue to place a floor under home prices.

Sydney

Home prices have been declining in Sydney in recent months, down in March, April and May consecutively. Even so, the declines have been modest, with prices down just 1.2% from February. Nonetheless, higher interest rates mean prices are likely to remain soft through much of 2026 before reaching a turning point late in the year. This also means home prices are likely to finish 2026 below where they started, before returning to positive growth in 2027. While we expect prices to grow in 2027, growth is likely to be below average for the city, given the high level of interest rates and Sydney’s extremely challenging affordability.

Angus Moore, Senior Economist

Updated 17 Jun 2026