Australian Property Market: A Tale of Two Forecasts

A range of forecasts and modeling reports present a divided outlook for the Australian property market. While some institutions predict continued, albeit moderated, price growth in 2026, other models suggest a potential decline in dwelling values by 2030 under specific economic conditions. Projections vary significantly depending on factors such as interest rates, unemployment, housing supply, and government policy.

2026 Market Outlook: Growth Projections and Divergent Views

General Market Moderation

Following a period of substantial activity in 2025—characterized by double-digit price growth in regions like Perth, Adelaide, and Brisbane—the market is widely anticipated to enter a phase of moderated growth in 2026.

PropTrack reported a national home price increase of 0.1 percent in December, with a year-on-year increase of 8.8 percent and a median home value of $880,000. Key factors expected to influence the 2026 market include the risk of interest rate increases, elevated borrowing costs, and government-backed initiatives for first-home buyers.

Conflicting Institutional Forecasts

Financial institutions and research groups offer differing estimates for price movements in 2026:

• Commonwealth Bank: Forecasts a national dwelling price increase of 5% in 2026 and 3% in 2027, citing pent-up demand and a supply shortage.
• ANZ: Lowered its capital city forecast to 2.8% growth in 2026 and 2.1% in 2027. The bank predicts small price falls in Sydney and Melbourne.
• KPMG: Predicts house price increases of 5.8% in Sydney and 6.8% in Melbourne during 2026. Unit prices are projected to rise 5.3% and 7.3% in Sydney and Melbourne, respectively. KPMG attributes this growth to first home buyer assistance and a deficit in new home building.
• AMP: Chief economist Shane Oliver described the national growth forecast of 5-6% over five years as "shaky," noting the potential for higher interest rates and a recession to trigger another cyclical downswing.

"Property investment in 2026 could face challenges due to observed signs of weakness in major capital cities and slowed growth in smaller capitals."
— Aaron Scott (bRight), specifying this assessment was for investment properties, not owner-occupier homes.

Expert Observations on 2026 Risks

• Anne Flaherty (REA Group): Projected that home prices are expected to reach new highs in 2026, but the pace of growth is anticipated to slow. She noted that while no further rate cuts are expected—and rate increases are possible if inflation continues—factors like limited housing supply and the government's 5% Deposit Scheme are expected to support price growth in affordable segments.

December 2025 Performance by Capital City

Data from PropTrack for December 2025 shows varied performance across capital cities:

Long-Term Scenario Modeling: A Potential Decline by 2030

A modeling report from Money.com.au, conducted by Primara Research, outlines a scenario in which Australian property prices could decline by 2030. This model is conditional on three specific factors occurring: unemployment rising to 4.6% by mid-2030, the Reserve Bank of Australia implementing three additional interest rate hikes, and housing supply growing at a medium pace.

Key Scenarios in the Model

• Most Probable Scenario (per model): National average dwelling values are projected to rise approximately 4.9% from December 2025 to $1,127,000 by June 2027, followed by a 15.4% decline to $953,000 by the end of 2030. This scenario implies an overall decline of 11% from the December 2025 quarter.
• Worst-Case Scenario: The model suggests deeper price falls are possible under extreme, sustained conditions.

"Housing supply is the largest variable in the most probable scenario, but unemployment is viewed as a more statistically reliable predictor of dwelling price changes."
— Primara Research

Methodology and Context

Primara Research states that its model uses housing supply as the largest variable in the most probable scenario but views unemployment as a more statistically reliable predictor of dwelling price changes. The report notes that Australia experienced two significant price corrections in the last 14 years: a 4.3% drop in 2022 over six months and a 6.3% drop in 2019 over five consecutive quarters.