Housing Outlook for 2026 Remains Bullish — With Conditions

Australia’s housing market has entered 2026 with a high level of confidence across much of the property and finance industry. Survey data, recent price movements, and lending activity all suggest that many market participants expect dwelling values to continue rising. However, this optimism is increasingly described as conditional, shaped by affordability pressures, interest rate uncertainty, and uneven performance across states.

Recent findings from Cotality’s Decoding 2026 Report highlight this mixed but generally positive outlook. The report, based on responses from real estate agents and financial professionals, found that 87 per cent of respondents expect dwelling values to rise during 2026. At the same time, only 3.5 per cent anticipate price declines, while almost half expect growth above 5 per cent.

While these figures point to strong confidence, they do not guarantee outcomes. Market conditions remain fluid, and results will continue to depend on location, borrowing capacity, policy settings, and broader economic trends.

How the Market Entered 2026 From a Position of Strength

Australia’s housing market did not arrive at 2026 in isolation. According to Cotality’s December Home Value Index, dwelling values increased across every capital city and regional market during 2025. National dwelling prices rose by 8.6 per cent over the year, adding approximately $71,400 to the median home value, which now sits at a record $901,257.

This widespread growth helped underpin confidence heading into the new year. However, momentum showed signs of easing toward the end of 2025. In December, national dwelling values increased by 0.7 per cent, marking the weakest monthly rise in five months. This slowdown suggests that while the market remains strong, growth may not be as uniform or as rapid moving forward.

As a result, many industry participants are approaching 2026 with optimism balanced by caution.

Confidence Remains High, But Increasingly Conditional

Although sentiment remains broadly positive, industry confidence is becoming more selective. Cotality Australia research director Tim Lawless noted that expectations are increasingly shaped by affordability constraints, interest rate uncertainty, and differences in regional performance.

The latest headline inflation figure sits at 3.4 per cent, and forecasts from major banks suggest the Reserve Bank of Australia (RBA) is likely to either hold the cash rate at 3.6 per cent or increase it to 3.85 per cent. This uncertainty continues to influence buyer behaviour and borrowing capacity.

Importantly, while some forecasts have previously suggested the possibility of future rate cuts, current market conditions remain uncertain, and the RBA’s path is not confirmed. As a result, confidence is less about predicting outcomes and more about preparing for a range of scenarios.

Supply Constraints Continue to Support Prices

One factor consistently supporting housing values is limited supply. Despite slowing momentum, there has been no meaningful increase in housing supply to offset ongoing demand. New construction remains constrained by labour shortages, material costs, and planning delays.

According to Cotality, the absence of a strong supply response in 2026 may help reduce the risk of dwelling values trending materially lower. In practical terms, this means that even if demand softens in some areas, limited stock could continue to place upward pressure on prices, particularly in markets with strong population growth.

For buyers and investors, this reinforces the importance of understanding local supply conditions rather than relying solely on national averages.

First Home Buyer Support Is Driving Activity

Government support measures continue to play a significant role in market activity. More than three-quarters of real estate agents reported increased activity following the expansion of the First Home Guarantee, which allows eligible buyers to purchase with a 5 per cent deposit.

Federal Treasury data shows that over 21,000 first home buyers have accessed the expanded scheme since October. However, this increased participation has also intensified competition around price thresholds set by the program.

At the same time, affordability remains a major constraint. Fewer than half of Australian suburbs are now priced below the First Home Guarantee caps, a sharp decline compared to a year earlier. This has contributed to stronger price growth in lower-priced segments of the market.

A Mixed Picture Across States and Territories

While national sentiment is positive, market conditions vary significantly by state. Survey respondents identified Queensland, Western Australia, and South Australia as the most optimistic markets heading into 2026.

In Queensland, 89 per cent of respondents expect dwelling values to rise, with more than half forecasting growth above 5 per cent. Western Australia recorded similarly strong sentiment, supported by demand spread across a broad range of price points. South Australia’s outlook appears to be driven by relative affordability and constrained housing supply.

By contrast, sentiment in New South Wales and Victoria remains positive but more subdued. In NSW, confidence is increasingly conditional due to high dwelling values and stretched borrowing capacity, making price growth more sensitive to interest rate movements.

Why Victoria Continues to Lag Other States

Victoria recorded the weakest state performance in 2025, and this trend has influenced expectations for 2026. While most respondents still anticipate price growth, confidence is weighed down by higher property taxes, reduced investor participation, and softer population growth.

Cotality highlighted that Victoria stands out for the scale of investor selling, combined with policy settings and higher holding costs. As a result, activity has remained more muted, even as first home buyers account for a larger share of lending.

This divergence underscores why state-based and even suburb-level analysis is increasingly important in 2026.

Key Lending and Market Themes Emerging in 2026

Several themes are shaping the housing market this year. Headlines across the finance and property sectors include:

Investors taking a larger share of new lending
Lower-priced homes experiencing increased competition
Shifting investor strategies as borrowing conditions evolve
Mortgage stress easing overall, though proactive management remains important

These trends reflect a market where activity is being driven by affordability thresholds, lending criteria, and careful planning rather than speculative behaviour.

For borrowers, understanding how lenders assess income, expenses, and existing debt remains critical. The RBA’s current cash rate settings, published on the RBA website, continue to influence assessment rates and borrowing capacity, even as future changes remain uncertain.

What This Outlook Means for Buyers and Investors

A “bullish” outlook does not mean the same outcome will apply to every buyer or investor. Instead, it highlights the importance of preparation, flexibility, and realistic expectations.

Markets may reward preparation and decisiveness. Investors who begin reviewing and restructuring their loans now may be better positioned to expand, refinance, or rebalance if conditions improve. Those who wait could find themselves reacting to changes rather than being as well prepared. Outcomes are subject to individual circumstances and lender criteria.

Ultimately, success in 2026 is likely to depend less on predicting interest rate movements and more on aligning lending structures with long-term goals.

Speaking With a Broker Early Can Provide Clarity

At Premium Select Finance, we work with buyers and investors to help them understand how current lending conditions may apply to their situation. This includes reviewing existing loans, assessing borrowing capacity, and discussing structure at a general level.

Contact us today at Premium Select FInance! We can help you understand what options could be available, depending on your circumstances.

General information only. This does not take into account your personal objectives, financial situation, or needs. You should seek professional advice before making financial decisions.