Where Home Prices Are Headed in 2026: A City-by-City Guide

Capital city prices are forecast flat for 2026, but Melbourne is down 4% and Perth is up 8%. Here's what the mid-year outlook means for buyers and investors.

Australia's housing market has reached its mid-year checkpoint in a position that looks very different depending on which city you call home. Capital city prices are expected to end 2026 essentially flat in aggregate — but behind that headline sits a wide spread of outcomes, from strong growth in Perth and Hobart to fresh declines in Sydney and Melbourne.

The forecast comes from the REA Group economics team, who attribute the slowdown to a combination of three consecutive RBA rate hikes earlier this year, the federal budget's changes to negative gearing and capital gains tax, and affordability that was already under pressure before rates began rising again. As Australian Broker reported, the team summarised it directly: "Home price growth has clearly slowed, and market conditions cooled, following the three consecutive rate hikes from the RBA. Home prices in Sydney and Melbourne have declined for three consecutive months, and home prices nationally have stalled."

The city-by-city breakdown

The divergence across capital cities is where the real story lies, and where borrowers and investors need to pay attention.

**Sydney and Melbourne** are the weak spots in the 2026 outlook. Sydney is forecast to end the year down 3% from its January level; Melbourne is projected down 4%. Both cities recorded new listing volumes up 6–7% annually over the first five months of 2026 — giving buyers more choice and contributing to softer auction clearance rates. Neither city is expected to bounce sharply in 2027 either: Sydney is forecast at 4% growth and Melbourne at 6%, both below the typical annual average of around 7%, reflecting the ongoing drag from high interest rates and stretched affordability.

**Perth** is the standout performer nationally. Underpinned by strong wages growth from the resources sector and ongoing population inflows, it is forecast to gain 8% in 2026 and a further 7% in 2027. For investors already positioned in Perth, the outlook remains solid.

**Brisbane and Adelaide** are both forecast at 5% growth for 2026. Brisbane carries stronger momentum into 2027 at 6%, backed by the second-largest housing supply gap relative to population growth among Australia's five largest cities. Adelaide's 2027 forecast is more modest at 4%, as affordability constraints tighten — the state is now described as the second-least-affordable in the country.

**Hobart** is quietly performing, forecast at 6% in 2026 and 7% in 2027, supported by first-home buyer activity and a constrained supply pipeline.

The combined capitals are forecast at 0% for the year. That margin for error on valuation-based lending decisions is narrower than it has been in recent years — particularly in Sydney and Melbourne.

Rate risks, mortgage stress, and what to do now

The RBA held the cash rate at 4.35% at its June meeting — unanimously, with no rate cut discussed. The board noted that financial conditions have tightened and the economy is slowing. But further hikes remain possible. Market pricing implies roughly a fifty-fifty chance of one more rate move before December.

That uncertainty has real consequences for households. According to Roy Morgan data cited in the REA Group report, 29.8% of mortgage holders — around 1,552,000 people — are at risk of mortgage stress in May, following the RBA's three consecutive rate increases this year. Rates are now at their highest level since 2011, and new housing commencements may slow further if borrowing costs remain elevated.

For borrowers already feeling the pressure, now is a practical time to review your position. Use the [refinance savings calculator](/calculators/refinance-savings) to model whether moving to a more competitive rate would make a meaningful difference to your monthly repayments. Lenders are actively competing, and [refinancing options](/home-loans/refinance) have widened for borrowers with solid equity and serviceability.

On the supply side, new housing completions remain well below what rising approvals and commencement data might suggest. That constrained pipeline is expected to place a floor under prices nationally — even through the softer phase of the cycle — limiting the downside in most markets.

For first home buyers, the expanded 5% deposit guarantee continues to support activity. First-home buyer lending reached 29.0% of owner-occupier lending in the March quarter — slightly above the decade average of 27.6%. If you are considering entering the market in a city like Perth, Hobart, or Brisbane where growth is still positive, explore your [first home buyer options](/home-loans/first-home-buyer) and use the [borrowing power calculator](/calculators/borrowing-power) to understand what you can realistically borrow at current rates.

For investors, the federal budget's tax changes are already weighing on demand. The REA Group economics team estimates that the negative gearing and CGT changes will reduce price growth by a couple of percentage points in both 2026 and 2027 — modest in the long run, but real in the short term, particularly in investor-heavy inner-city markets. Compare the available [investor home loan options](/home-loans/investor) to understand what product settings work best under the new tax landscape before making your next move.

The turning point for the broader market is expected late in 2026 and into 2027 — but the path there is not uniform. Your city, your timing, and your loan structure all matter more than the national average right now.

[Read the full mid-year analysis at Australian Broker](https://www.brokernews.com.au/news/breaking-news/australias-housing-market-just-got-its-midyear-report-card-289534.aspx)