Australian housing market outlook 2026 | Opportunities and Risks

This is an extract from Oliver Hume's June Quarter Quarterly Market Insights (QMI) report, our proprietary market research published every quarter. The full report, including detailed data ones tablished and new land markets, is available exclusively to registered subscribers. Access the full June Quarter QMI.

Residential markets are slowing

A return to increasing interest ratescombined with a Federal Budget looking to shift the balance away from investorsand toward first home buyers has residential markets slowing.

Established markets: Sydney and Melbourne leading theslowdown

In established markets, this slowing is being led by the high-priced and most interest-rate sensitive market of Sydney and Melbourne, the weakest established market in the country for the better part of 5 years. But we are also finally seeing the excessively high monthly rates of dwelling price growth slow (and in some cases disappear) for Perth, Brisbane and Adelaide.

The latest forecasts have 2026 ending the year with negative price growth in established markets at a national level and generally a return to price growth in 2027, when rates are currently forecast to be falling again as inflation is brought under control.

New land markets: no single national picture

Variance across new land markets make a national outlook meaningless, with large differences in the underlying demand-supply balance and their own regional challenges. But on balance, they are likely to perform below their 2025 levels in response to a weaker established market, the increasing rates environment and investor uncertainty.

Confidence factors and risk factors

There are some specific factors that make me confident that the new housing market in Australia has strong fundamental under pinnings, and some external risk factors worth keeping an eye on.

Federal Budget changes favour off-the-plan housing

First, the Federal Budget announcements related to investor taxation changes on balance will be positive for the off-the-plan housing market. With negative gearing and capital gains tax regimes now demonstrably more attractive for new builds compared to buying in the established market for property investors, over time, some proportion of those 150,000+ annual investors in established housing markets will shift their focus to new apartments, townhouses and detached housing on vacant land. Once the transient impact on established dwelling prices passes, this will mean increased overall demand for new land from investors.

Fundamental drivers remain strong

Secondly, fundamental drivers remain strongand we’re still a country with a large underlying undersupply of housing inmost key markets.

Population growth has come off itspost-COVID highs but has stabilised above forecast levels and continues todrive housing demand. Housing completions are significantly under the targetsof most state governments as well as the National Housing Accord. Whether itwill be a returning new apartment market, more medium density filling the“missing middle”, or the good old reliable long-term supplier of most of thenew housing in Australia, greenfield land, all these markets have a long-termand growing role to play in housing Australians. As with all housing markets,stable and ongoing provision of credit for long-term purchases for consumers iskey. The housing downturn of 2017- 2019 happened in a stable or even fallingrates environment, but credit availability suffered due to the Royal Commissioninto Misconduct in the Banking and Financial Services Industry.

Private credit markets: a risk worth watching

While housing finance available to consumers remains readily available via the banking and financial services industry, there has been an increased focus recently on private credit markets.The RBA is worried about the fallout from a rupture in overseas private credit markets and flagged the heavy exposure of local private credit funds to realestate and construction. We’ll be keeping a close eye on this going forward.

The full analysis, including new land market data, corridor-level detail, and the credit risk outlook, is available in the complete June Quarter QMI. Register to receive the June Quarter QMI and all future editions.