Australia's property market is entering a period of adjustment in 2026. According to the latest PropTrack Property Market Outlook, higher interest rates, affordability pressures and policy changes are expected to slow price growth across many capital cities before the market begins recovering in 2027.

While Sydney and Melbourne are forecast to experience modest price declines this year, other capitals such as Brisbane, Adelaide and Perth are expected to continue recording positive growth.

In this article, we break down the latest market forecasts, explain the factors influencing house prices, and discuss what these trends could mean for buyers, investors and homeowners.

Australian Property Market Forecast 2026

PropTrack forecasts that combined capital city home prices will remain broadly flat in 2026, before returning to growth in 2027.

Source: PropTrack Property Market Outlook, June 2026.

Why Is Australia's Property Market Slowing?

Several factors are expected to weigh on housing prices throughout 2026.

Higher Interest Rates

Higher borrowing costs continue to reduce borrowing capacity and place pressure on housing affordability. Although inflation has eased compared with previous years, uncertainty around future cash rate movements remains.

Housing Affordability

Affordability remains one of the biggest challenges facing Australian home buyers.

High property prices combined with elevated mortgage repayments mean many households have less purchasing power than in previous years.

Federal Budget Tax Changes

Changes announced in the Federal Budget are expected to reduce investor demand, particularly in the short term.

According to PropTrack, these changes may reduce overall home price growth by several percentage points across 2026 and 2027.

Sydney Property Market Forecast

Sydney has experienced three consecutive months of price declines.

Although prices have fallen only around 1.2% since February, higher interest rates are expected to keep market conditions relatively soft through much of 2026.

PropTrack forecasts:

2026

⬇️ -3%

2027

⬆️ +4%

The report suggests Sydney could reach a turning point towards the end of 2026 before returning to moderate growth next year.

What's Supporting Australia's Housing Market?

Although growth has slowed, several structural factors continue supporting long-term property values.

Population Growth

Australia's growing population continues increasing demand for housing.

First Home Buyer Support

Government initiatives such as the expanded 5% Deposit Scheme continue encouraging first-home buyers to enter the market.

Housing Supply Remains Tight

Although building approvals have improved, new housing completions remain relatively low.

Limited housing supply continues placing a floor under property prices.

Is Now a Good Time to Buy Property in Australia?

Whether now is the right time depends on your financial situation and long-term goals.

For owner-occupiers, periods of slower price growth can provide greater negotiating power and more property choices.

For investors, understanding local market conditions is often more important than attempting to perfectly time the market.

While short-term market conditions remain challenging, Australia's long-term housing fundamentals—including population growth, constrained housing supply and ongoing demand—continue to support the residential property market.

FAQ

Will Australian house prices fall in 2026?

According to PropTrack, combined capital city prices are expected to remain broadly flat in 2026, although Sydney and Melbourne are forecast to experience modest declines.

Will house prices rise again?

PropTrack forecasts combined capital city prices will increase by 5.5% in 2027.

Is now a good time to buy property?

A softer market may provide buyers with greater negotiating power and more property choices, although purchasing decisions should always consider individual financial circumstances.

Which Australian city has the strongest forecast?

Perth is forecast to record the strongest growth in 2026, with home prices expected to increase by 8%.

Conclusion

Australia's property market is expected to remain relatively subdued throughout much of 2026, particularly in Sydney and Melbourne. However, underlying demand, population growth and constrained housing supply continue to provide long-term support for residential property values.

While market conditions vary between cities, understanding local trends and economic drivers is essential for making informed property decisions. As forecasts suggest a return to growth in 2027, buyers and investors may benefit from staying informed and planning ahead.

Still Have Questions?

Our Team Is Here to Assist You.