Housing outlook for 2026 remains bullish

Findings from data analytics firm Cotality’s Decoding 2026 Report, based on responses from real estate agents and financial professionals across the property and finance sectors, found that 87 per cent of respondents expected dwelling values to rise over the year ahead.

Only 3.5 per cent anticipated that prices would fall, while almost half expect growth above 5 per cent, reflecting continued market optimism following widespread price gains through 2025.

According to Cotality’s December Home Value Index, dwelling values rose across every capital city and regional market in 2025.

National dwelling prices increased by 8.6 per cent over 2025, adding $71,400 to the median home value, which now sits at a record $901,257.

Momentum did ease in December, however, with national dwelling values rising 0.7 per cent – the weakest monthly increase in five months.

While expectations for price growth remain broadly positive, Cotality Australia research director Tim Lawless said industry confidence is becoming more conditional amid affordability constraints, interest rate uncertainty, and uneven regional performance.

The latest headline inflation figure was 3.4 per cent, and latest forecasts from the major banks suggest the Reserve Bank of Australia is likely to either hold the cash rate at 3.6 per cent or lift it to 3.85 per cent.

“The housing market is entering 2026 from a position of strength, but uncertainty around inflation, interest rate settings and affordability is likely to weigh on confidence,” Lawless said.

“However, the absence of a meaningful supply response in 2026 should help offset the risk of home values trending materially lower.”

First home buyer support boosts activity

More than three-quarters of real estate agents reported an uplift in activity following the expansion of the First Home Guarantee, with competition intensifying around the scheme’s price thresholds.

Federal Treasury data shows more than 21,000 first home buyers have accessed the expanded 5 per cent Deposit Scheme since October.

However, affordability remains a key constraint, with fewer than half of Australian suburbs now priced below the First Home Guarantee caps – a sharp decline from a year earlier.

Broker Daily has reported on the surge in prices for dwellings eligible under the government’s expanded 5 per cent Deposit Scheme.

A mixed picture across states

Lawless added that while the recent slowdown was partly driven by affordability pressures and shifting interest rate expectations, conditions varied significantly by state.

“National averages distort the variation of performances and market conditions at a local level, and it’s those differences that are becoming more important as affordability and policy settings diverge,” he said.

Survey respondents identified Queensland, Western Australia, and South Australia as the most optimistic markets heading into 2026, following several years of strong performance.

In Queensland, 89 per cent of respondents expected dwelling values to increase, with more than half forecasting growth in excess of 5 per cent. Western Australia recorded similarly strong sentiment, supported by demand spread across a wide range of price points, helping underpin steadier growth.

Cotality said South Australia’s bullish outlook appeared to be driven by relative affordability and constrained housing supply.

“Strong internal migration, tighter rental markets and a persistent shortage of housing have combined to support all three of these markets,” Lawless said.

“Those fundamentals remain largely intact but it’s not surprising to see Queensland and Western Australia agents optimistic about price growth in 2026 given their respective fundamentals and economic prospects.”

In Victoria and NSW, sentiment remained positive, but more subdued, with 84 per cent and 85 per cent of respondents, respectively, expecting house prices to rise.

In NSW, Cotality found sentiment was becoming increasingly conditional, reflecting high dwelling values and stretched borrowing capacity, resulting in more interest rate-sensitive growth expectations.

Victoria continues to lag in price growth after recording the weakest state performance in 2025. While most respondents still anticipated price growth, confidence was weighed down by higher property taxes, reduced investor participation, and softer population growth.

“Victoria stands out for the scale of investor selling, policy settings and higher holding costs all of which have weighed on activity, even as first home buyers now account for a larger share of lending,” Lawless said.

[Related: SME investment intent remains strong despite economic uncertainty]