Property forecasts for 2026 point to uneven growth and shifting buyer priorities

Australia’s housing market is heading into 2026 with improving confidence, but forecasts suggest the year ahead will be defined less by broad national momentum and more by uneven, localised conditions across cities and housing types.

LJ Hooker expects price growth to continue, though at a slower and more variable pace, with affordability increasingly shaping where buyers compete and where markets outperform.

The group says more affordable capital cities, including Perth, Adelaide and Brisbane, are likely to remain ahead of Sydney and Melbourne as local supply and demand dynamics take precedence over interest-rate settings.

LJ Hooker Head of Research and Business Intelligence Mathew Tiller said buyers had adjusted to higher borrowing costs following the Reserve Bank of Australia’s shift towards rate cuts.

“Interest rates are expected to stay on hold for most of 2026, so the cash rate becomes the new normal rather than the main driver,” Mr Tiller said.

“Against that backdrop, we anticipate that listings, supply and demand will push market performance.

The number of buyers looking at property should remain solid, supported by population growth and improving confidence.”

The agency anticipates a “patchwork” year, with conditions differing markedly between suburbs and cities.

It also expects more owners to list after an extended period of tight stock, easing some pressure on prices while still leaving many areas seller-friendly due to ongoing housing shortages.

Affordability pressures are also shifting buyer priorities, with value increasingly outweighing postcode loyalty.

LJ Hooker says this is likely to support demand in outer suburbs, more affordable capitals and regional hubs, while townhouses, dual-occupancy homes and mid-rise apartments gain favour.

Rental markets are expected to remain tight through 2026, with LJ Hooker pointing to insufficient approvals and construction, particularly in medium- and higher-density housing, as a factor keeping vacancy rates low and rents elevated.

Where the opportunities are emerging

Meanwhile, Oliver Hume Property Group is forecasting a different pattern in the residential land market, with Melbourne tipped to re-emerge as the leading capital city performer after several subdued years.

In its 2026 Outlook, the group says Melbourne’s recovery is gaining traction, supported by population growth, relative affordability and improving buyer sentiment.

“Melbourne’s land market recovery is gathering pace and is expected to be the country’s best (capital city) performer,” Oliver Hume said.

Chief executive Michael Coppini said conditions were aligning for stronger activity.

“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.”

Oliver Hume data shows the gross median lot price in Melbourne rose 2.1 per cent in the September quarter to $407,000, up from $398,500 in the June quarter, while prices were unchanged compared with a year earlier, pointing to stabilisation after earlier declines.

Nationally, the group expects continued growth across most land markets, though at a more moderate pace than in recent years.

South East Queensland, Perth and Adelaide are forecast to keep rising, but Oliver Hume says momentum in those markets is easing.

Chief Economist Matt Bell said demand remains underpinned by broader economic and demographic factors, even as interest-rate expectations shift.

“Markets are now pricing in an increase in 2026,” Mr Bell said, adding that population growth, low unemployment and housing undersupply continue to support activity.

Sydney, however, remains constrained by structural land shortages, with Mr Coppini saying it “remains the market with the largest gap between underlying demand and supply”.

Taken together, the outlooks point to a market adjusting rather than accelerating, where affordability, housing type and local supply pipelines are increasingly shaping outcomes.

While LJ Hooker expects more affordable capitals to continue outperforming in established housing, Oliver Hume’s forecast suggests Melbourne’s land market may mark one of the more notable shifts in the year ahead.