Home prices across Australia’s combined capital cities are forecast to climb a further 6–8% in 2026, taking values to fresh record highs but at a slower pace than 2025, according to REA Group economists Angus Moore, Eleanor Creagh, and Anne Flaherty (pictured left to right).
They note this is similar to the average rate of growth seen over the past three decades.
Home price growth will be supported by improved borrowing power following three cash rate cuts in 2025, as well as ongoing income growth. At the same time, extremely stretched affordability is expected to cap how quickly prices can rise.
The forecast assumes the cash rate stays on hold through 2026. If inflation forces the Reserve Bank to lift rates again,price growth is likely to be weaker than expected.
The outlook comes as affordability hits record strain, with one recent report finding home values up almost 50% in five years and about 11 years now needed to save a 20% deposit in many markets, prompting other forecasters to also predict slower price growth in 2026 despite continued gains.
REA Group economists say the market will enter next year with values still edging higher, but the boom conditions of recent years are clearly fading.
“Australia’s housing market enters 2026 with prices still rising, but signs that momentum is moderating,” they said.
They expect tight supply, low listings and underbuilding to “place a floor under prices throughout 2026”, even as stretched affordability and a pause in rate cuts slow the pace of gains.
Demand will be underpinned by population growth, rising incomes, investor activity, and improved borrowing capacity after 2025’s rate cuts, with the expanded 5% Deposit Scheme and Help to Buy shared equity program adding further support for first-home buyers.
But they warn that high repayment burdens and large deposit hurdles will increasingly cap how far demand can run.
“2026 is more likely to deliver a steady and slower pace of growth compared to 2025, with stretched affordability meaning growth will remain well below the 20-30% annual gains seen in past booms,” the REA Group economists said.
Housing market activity has been particularly strong in Sydney and Melbourne through 2025, especially in spring. New listings in October were the busiest on record for Melbourne and the busiest in more than a decade in Sydney, with auction volumes also elevated across both cities.
In Sydney, 2026 is expected to bring more modest gains relative to 2025, with price growth no longer accelerating. With rates on pause, borrowing capacity has limited scope to expand and affordability will act as a ceiling on how quickly prices can rise. More affordable outer and middle-ring suburbs are likely to attract the bulk of demand. With new supply constrained and rental markets tight, prices are still expected to move higher, but at a slower pace than in recent years.
Melbourne is forecast to continue its gradual recovery after several weaker years, with prices expected to lift between 5% and 7%. Higher levels of stock on market after a relatively busy spring, giving buyers more choice and making conditions a little less competitive, will likely keep the pace of growth in Melbourne below that of the stronger capitals.
Perth and Brisbane are expected to remain among the better‑performing capitals but step down from the exceptionally strong growth of recent years as affordability bites.
Brisbane heads into 2026 after several years of very strong gains, underpinned by overseas and interstate migration, tight stock on market and constraints on the delivery of new housing, infrastructure investment, and very tight rental markets. Those fundamentals remain supportive, but the extraordinary pace of growth seen in the past few years is unlikely to persist as affordability becomes a more significant headwind. Lower priced regions in Brisbane’s west are expected to remain the most resilient, while higher value regions may see a more noticeable slowdown. Overall, Brisbane is still likely to outpace the national average, but to a lesser degree than in recent years.
Perth is likely to remain one of the stronger capital city markets in 2026. Population inflows, very tight rental conditions and an undersupply of new housing continue to put upward pressure on prices. However, after such a large increase in home prices in recent years, affordability has deteriorated and is set to gradually curb the rate of growth. The most probable path is for Perth to keep outperforming the other capitals, but with price growth stepping down from the exceptionally strong pace recorded in 2024 and 2025.
Adelaide’s outlook for 2026 remains solid, but the city has experienced a remarkable increase in home prices in recent years, meaning affordability is very challenging. Momentum will naturally ease as home prices are now much higher. Price growth is expected to remain positive but below the pace of recent years as growth moderates.
Hobart has already moved through a boom and cooling phase, with home prices yet to recover their 2022 peak. 2026 is likely to eventuate as a period of consolidation rather than a renewed boom. Affordability is stretched, with prices still high relative to local incomes. Meanwhile, population growth has slowed from its earlier highs. That combination points to steady price growth and a likely reclaiming of the 2022 peak in prices, but not a return to the exceptionally fast pace of gains seen in the pandemic boom.
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