Property Market Outlook - June 2026

Home Prices in the Illawarra Region: What to Expect Through 2027

Current Trends in the Housing Market

It is expected that home prices will finish 2026 largely flat across the combined capitals. Higher interest rates and strained affordability will likely lead to soft or falling prices through the latter half of 2026. However, we anticipate a turning point and a return to growth late in the year and into 2027.

Changes in the Federal Budget, along with a reduction in investor demand, will weigh on growth in 2026 and 2027. Estimates suggest that home prices will be a few percentage points lower than previously expected. This translates into a slowdown in home price growth during these years.

This forecast assumes little change in the cash rate during the second half of 2026. Market expectations indicate a roughly fifty-fifty chance of one further hike by December. However, this will depend on how inflation evolves. Inflation expectations remain elevated, despite recent falls in oil prices. If rates rise in response to higher inflation, it could negatively impact home prices.

Regional Market Conditions

Housing market conditions have cooled in major cities like Sydney and Melbourne in 2026. Despite this, activity has remained strong. Auction clearance rates have declined in both cities as rates have risen. However, new listings over the first five months of 2026 were up 6-7% annually in both cities. This increase has given buyers more choices, likely contributing to softer prices and clearance rates.

In contrast, activity in other capitals has been more subdued. This limited choice for buyers has supported home price growth in those areas.

Factors Supporting Housing Demand

Despite the cooling market, housing demand will continue to be supported by population inflows and income growth. Additionally, there is boosted demand from first-home buyers due to the expanded Australian Government 5% Deposit Scheme. This initiative makes it easier for new buyers to enter the market.

Supply Side Challenges

On the supply side, new residential construction remains soft. Leading indicators, such as building approvals and commencements, have been trending positively for the past couple of years. However, actual completions remain low. With rising rates, new commencements may slow down, and this limited flow of new homes will continue to place a floor under home prices.

Sydney's Market Outlook

Home prices in Sydney have been declining in recent months, with prices down 1.2% from February. Higher interest rates mean prices are likely to remain soft through much of 2026. We expect home prices to finish 2026 below where they started, before returning to positive growth in 2027. However, growth is likely to be below average for the city, given the high level of interest rates and Sydney’s challenging affordability.

Conclusion

In summary, the Illawarra region's housing market is facing a period of adjustment. While we expect some challenges in the short term, particularly with interest rates and affordability, there are also factors that could support a recovery. The combination of population growth and government initiatives aimed at first-home buyers may help stabilize the market. As we move into 2027, we remain optimistic about the potential for growth, albeit at a slower pace than in previous years.

For more insights and updates on the real estate market, feel free to reach out to me. I'm here to help you navigate these changes and make informed decisions about your property investments.

Angus Moore, Senior Economist

Updated 17 Jun 2026