2026 Outlook: Melbourne Set To Lead Australian Land Markets Higher, Despite  Spectre Of Higher Interest Rates

Key Points

• 2026 is shaping up to be a positive year for the land and housing market.
• Melbourne’s land market recovery is gathering pace and is expected to be the country’s best (capital city)performer.
• 2025’s best performers (South East Queensland, Perth & Adelaide) may moderate but will continue growing.
• Credit supply continues to put upward pressure on inflation, interest rates and prices. We will continue to monitor credit supply.

Melbourne’s land market is poised to begin its long-awaited recovery in 2026, with property service group Oliver Hume Property Group declaring the year was shaping up as one of the most interesting in the recent history of the Australian housing market.

Releasing the company’s 2026 Outlook statement today, Mr Coppini said that despite shifting expectations around interest rates, the fundamentals supporting Victoria’s growth trajectory were strengthening.

“We are particularly optimistic about Melbourne, where we expect to see sustained improvement in both prices and transaction volumes,” Mr Coppini said. “After several challenging years, all indicators point to Melbourne emerging as one of the country’s most resilient and opportunity-rich land markets in 2026.”

“Melbourne now offers the best relative affordability of eastern seaboard capital cities, and volumes have already begun to rise.”

Oliver Hume data shows the gross median lot price in Melbourne rose 2.1% to $407,000 in the September quarter, up from $398,500 in the June quarter. Headline prices are flat at precisely the same level as September 2024. The median price is now well behind South East Queensland ($483,600), with Adelaide ($349,900) closing.

Mr Coppini said that while other high-performing capitals like Perth, South East Queensland and Adelaide, were likely to ease from recent highs into more sustainable levels of growth, Melbourne was entering a phase of renewed confidence underpinned by improving buyer sentiment and structural shifts in population and supply.

Mr Coppini said the continued expansion of credit and high levels of liquidity would remain one of the strongest upward forces on property markets in 2026. However, Mr Coppini commented that the proposed changes to investor lending may impact market volumes and general sentiment.

“The sustained expansion of credit over recent years has led to vast amounts of liquidity in the system which is enhancing purchasing capacity during a period of enduring structural constraints in housing supply,” he said. “This excess liquidity has been a major underlying factor in the increase in prices and will continue to push up inflation, and possibly, interest rates.”

Buyers To Look Past Interest Rate Increases

Oliver Hume Chief Economist Matt Bell said recent changes to the outlook for interest rates, with markets now pricing in an increase in 2026, had tempered the company’s outlook, but didn’t change the direction of it.  

“Population growth is forecast to remain one of the highest rates of growth in the developed world, unemployment remains low, supporting household incomes and the household sector is strengthening,” he said.

“Over 2026, we see two key dynamics at play: the impact of rate cuts to date and first-home buyer incentives. Together, these factors will combine with the existing undersupply to support price and volume growth in both established and new markets over the next 12–24 months." 

“Land markets will benefit from the strong price growth already evident in established markets.”

Sydney will remain the most constrained and least affordable market

Mr Coppini said there was no path for Sydney to lift out of its structural bind in 2026.

“It remains the market with the largest gap between underlying demand and supply,” he said. “Sydney cannot build enough serviced, infrastructure-ready land to meet the needs of its growing population.”

“Planning delays, feasibility problems and infrastructure bottlenecks will continue to choke supply, and affordability will deteriorate further. Volumes will improve slightly, but Sydney will remain the most inaccessible land market in Australia.”

Mr Bell said while rate cuts to date would increase demand for new housing, the impact would be much lower than in other markets because of the massive gap between borrowing capacity of FHBs and market prices.

“Sales will rise, but not significantly, and prices remain under pressure,” he said.

South East Queensland will perform well, but not exceptionally

The median price/sqm in South East Queensland rose again to $1,151/sqm in the September quarter, compared to $1,077 in Melbourne and $919 in Adelaide.

Mr Coppini said South East Queensland land was now more expensive than Melbourne on both a median price and price/sqm basis.

“South East Queensland will enjoy another solid year, supported by steady migration and a strong, established housing market,” he said. “However, the region has already run at or near supply capacity for several years.”

“Cost and supply constraints will temper the advantage that SEQ enjoyed from 2023 to 2025, while affordability will become an issue.”

Mr Bell said rate cuts to date and a stronger household sector would undoubtedly be a positive driver, and a very strong established market means new house and land was still an attractive option for many buyers.

“We expect volumes to push moderately higher and price growth to ease from the current high levels but remain solidly positive,” he said.

Perth’s long winning streak will begin to moderate

Perth’s new housing market has been the standout performer of the last three years with affordable land, exceptional rental yields and booming interstate migration driving a powerful cycle. However, cycles mature, and Perth enters 2026 with less room to run.

“Price growth has eaten into affordability, and investor activity will cool as returns normalise and eastern states markets regain appeal,” he said. “Perth will remain strong but will shift from exceptional to sustainable.”

On the Perth market, Mr Bell said: “As recent strong price growth has eroded some of Perth’s affordability advantage, we expect some easing of sales volumes in what has been the strongest market in the country for the last few years, followed by some easing of price growth later in 2026.”

Adelaide will continue to provide strong opportunities

Demand for land in and around Adelaide continues to escalate, with a new wave of supply in the city’s southern and northern growth corridors driving up volumes and prices in the September quarter, but the market is showing signs of moderation.

The growth in median lot price in Adelaide rose by a relatively tame 4% to a new high of $349,990 in the September quarter, leaving annual growth at a very strong 30%.  

“We think Adelaide is on its way to becoming one of the most structurally resilient land markets in the country, with deep and stable demand,” Mr Coppini said.

Mr Bell said demand in Adelaide had translated directly into price gains over the last 12 months.

“While the outlook for new supply has improved, the translation to on-the-ground delivery will be slow,” he said. “We expect sales volumes to increase in line with new supply released, and the very strong price growth seen over the last three years (~20% p.a.) to ease back to levels more in line with established market growth.”

Ends.

Inquiries to Mitchy Koper on 0417771778.

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