Revealed: Where property values will grow the most in 2026
Australia’s housing market is expected to keep rising in 2026, but new research shows growth will increasingly depend on postcode, not postcode averages.
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Confidence across Australia’s housing market remains firm heading into 2026, but momentum is expected to diverge sharply by state as affordability ceilings, interest rate uncertainty and local supply constraints reshape conditions, according to new research from Cotality and a broad range of market forecasters.
Findings from Cotality’s Decoding 2026 report, based on responses from real estate agents and finance professionals nationwide, show 87% of respondents expect dwelling values to rise over the year ahead, while just 3.5% anticipate prices will fall.
Almost half forecast price growth of more than 5%, highlighting ongoing optimism following widespread gains through 2025.
That outlook broadly aligns with forecasts from major banks and property research groups, including ANZ, Domain, PropTrack and SQM Research, with the majority of forecasters expecting national home values to rise again in 2026, albeit at a more moderate and uneven pace than in recent years.
Cotality’s December Home Value Index recorded price growth across every capital city and regional market in 2025, with national dwelling values rising 8.6%, adding around $71,400 to the median home value.
Cotality Australia Research Director Tim Lawless said conditions softened toward the end of the year as affordability pressures intensified and expectations around interest rates shifted.
“Housing conditions were strong for most of 2025, which explains the broadly positive sentiment,” Lawless said.
“However, national averages mask increasingly wide variation at the local level, and it’s those differences that are becoming more important as affordability constraints and policy settings diverge.”
Smaller States tipped to outperform
Queensland, Western Australia and South Australia continue to stand out as the most positively viewed markets entering 2026, both among industry respondents and external forecasters.
Cotality survey results show 89% of Queensland respondents expect prices to rise, with more than half anticipating growth above 5%.
That optimism is echoed by forecasts from ANZ, Domain and SQM, which expect Queensland to remain one of the stronger-performing markets nationally, supported by population growth, tight rental conditions and ongoing housing shortages.
Western Australia also features prominently in forecasts, with SQM Research projecting some of the strongest percentage gains nationally, while Domain and ANZ expect Perth prices to continue rising, albeit at a steadier pace than in 2025.
Broad-based demand across price points and relatively affordable entry levels are expected to support further growth.
South Australia’s outlook remains underpinned by relative affordability and limited new supply. Most major forecasters expect Adelaide dwelling values to rise again in 2026, though generally at a more moderate pace compared with Queensland and Western Australia.
“Strong internal migration, tight rental markets and a persistent undersupply of housing continue to support these markets,” Lawless said.
“Those fundamentals largely remain in place, which helps explain why both agents and forecasters remain optimistic about price growth across much of the country outside the east coast’s largest cities.”
NSW and Victoria face tighter constraints
While sentiment in New South Wales remains positive, expectations are increasingly conditional. High dwelling values, stretched borrowing capacity and sensitivity to interest rate movements are expected to limit the pace of growth.
ANZ, Domain and PropTrack all forecast continued price increases in Sydney in 2026, though at a more moderate pace than recent years, reflecting affordability ceilings and rising listings.
Victoria continues to lag national performance after recording the weakest growth among the states in 2025. Although most forecasters still expect Melbourne home values to rise in 2026, expectations remain subdued relative to other capitals.
Higher property taxes, reduced investor participation and softer population growth continue to weigh on confidence, despite first home buyers accounting for a larger share of lending.
“Victoria stands out for the scale of investor selling, policy settings and higher holding costs, all of which have dampened activity,” Lawless said.
“While prices are still expected to trend higher, most forecasters see Victoria underperforming the national average again in 2026.”
First home buyer support lifts activity, but affordability bites
More than 75% of real estate agents reported increased activity following the expansion of the First Home Guarantee, with competition intensifying around scheme price thresholds.
Federal Treasury data shows more than 21,000 first home buyers have accessed the expanded 5% deposit scheme since October*.
However, affordability remains a key constraint, with fewer than half of Australian suburbs now priced below First Home Guarantee caps, a sharp decline from a year earlier.
Confidence holds, but risks are building
While expectations for price growth remain broadly positive across most forecasts, confidence is becoming more conditional as affordability ceilings, interest rate uncertainty and uneven regional dynamics shape the outlook.
“The market enters 2026 from a position of strength, and the majority of forecasters still expect dwelling values to rise,” Lawless said.
“However, affordability challenges, interest rate uncertainty and policy settings are likely to cap the pace of growth, particularly in higher-priced markets.
“With no material supply response expected in 2026, tight housing conditions should help offset downside risks, but outcomes will increasingly depend on local market dynamics rather than national trends.”
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As interest rates, inflation and market sentiment fluctuate, investors are being urged to focus on data, not panic.
While many investors are waiting for commercial property prices to fall alongside the residential market, buyers’ advocate Abdullah Nouh says they’re looking at the wrong data, with demand strengthening across several commercial sectors.
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For months, Australia’s property conversation has centred on falling house prices, higher interest rates and the impact of the Federal Budget on investors.
But according to Melbourne buyers’ advocate Abdullah Nouh, many investors expecting commercial property to follow the same path are overlooking what’s actually happening across the market.
“The biggest mistake investors are making is treating commercial property as one market that moves in one direction at one time,” Nouh says.
“Office towers, neighbourhood medical centres, industrial warehouses and childcare centres all respond to completely different supply and demand dynamics.”
Rather than experiencing a broad downturn, he says that parts of the commercial market continue to perform strongly, particularly sectors supported by essential services and with limited new supply.
Neighbourhood retail centres anchored by supermarkets and medical services have proven more resilient than many expected, while industrial property continues to benefit from tight supply in most major cities.
Medical centres, childcare assets and other essential service properties are also attracting sustained tenant demand despite higher borrowing costs.
Office markets, however, are telling a different story.
Premium buildings in well-connected locations are beginning to stabilise, Nouh says, while secondary office stock in oversupplied precincts continues to face pressure.
“This isn’t a story about commercial property going up or going down,” he says.
“It’s a story about asset selection mattering more than the headlines.”
The changing market is also altering the questions investors are asking.
Rather than focusing solely on buying another residential investment property, Nouh says more investors are now looking for higher rental income and improved cash flow.
“Instead of asking how to buy another investment property, investors are increasingly asking how they can generate more income from their portfolio,” he says.
He believes commercial property has become part of that conversation because it can deliver stronger rental returns while still offering long-term capital growth when quality assets are selected carefully.
However, Nouh warns investors against assuming every commercial property represents a sound investment simply because it offers a higher yield.
“I’ve seen commercial properties remain vacant for years because they’re in locations with weak business activity,” he says.
“A high yield isn’t necessarily evidence of a good investment. Sometimes it’s evidence of the opposite.”
Instead, he says investors should focus on the same fundamentals that have always underpinned successful commercial acquisitions, including tenant demand, constrained future supply, location quality and whether another tenant would readily occupy the property if the existing lease expired.
“The lease and the tenant both matter,” Nouh says.
“But neither replaces buying a quality asset in a quality location.”
As investors continue to assess the outlook for property following this year’s Budget changes, Nouh believes the biggest opportunity may lie in recognising that commercial property is not a single market.
“Property has never moved as one market,” he says.
“The better question isn’t whether commercial property will fall in the short term. It’s which assets are likely to be in greater demand over the next decade, and whether today’s market creates an opportunity that looks obvious in hindsight.”
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