Australia’s major lending institutions have issued updated property market forecasts pointing to a softer outlook for Greater Sydney through the remainder of 2026.
A combination of prolonged elevated interest rates at a 4.35 per cent cash rate, recent federal budget changes to investor tax settings, and a shift in buyer sentiment has prompted economic research teams at ANZ, Commonwealth Bank, and Westpac to adjust their price growth models.
For real estate professionals across metropolitan Sydney, the revised bank projections highlight a multi-speed market where upper-tier residential properties are bearing the brunt of price adjustments, while mid-tier family homes and outer suburban corridors maintain relative stability.
ANZ Research issued one of the most pronounced revisions, tipping Sydney dwelling values to decline by 9.9 per cent over the year, with peak-to-trough falls reaching up to 14.5 per cent extending into 2027.
According to the ANZ Housing Forecast Update and detailed analysis in ANZ Bluenotes, economists Adam Boyton and Madeline Dunk note that Sydney and Melbourne remain particularly sensitive to borrowing constraints and tax policy shifts.
Their research highlights that top-quartile properties have experienced consecutive monthly pullbacks, whereas owner-occupier demand in entry-level segments continues to provide an underlying buffer.
Commonwealth Bank senior economists Trent Saunders and Ashwin Clarke have downgraded their national dwelling price forecast to flat for 2026, down from a 3 per cent forecast at Budget time and 5 per cent earlier this year.
“We now expect national dwelling prices to be flat over 2026, down from a forecast of 3% at Budget and 5% in March,” the economists wrote.
They said the softening had been building for some time, but the Federal Budget’s changes to negative gearing and capital gains tax had sped things up.
“The tax changes have accelerated a slowdown that was already underway. Auction clearance rates have been falling since the RBA started its recent hiking cycle, price growth has continued to slow, and sales activity has softened,” they said.
Auction clearance rates are now well below 2025 levels, homes are taking longer to sell, and price growth has slowed across most capital cities – with Sydney and Melbourne weakening the most and continuing to record falls, while Perth, Brisbane and Adelaide are still growing, but at a slower pace. Within cities, declines have been sharper in higher-priced areas, including parts of Sydney’s east and north-west.
Mr Saunders and Mr Clarke said the market’s reaction to the tax changes had been faster than expected, raising the risk of a sharper near-term slowdown, though they maintain the long-term impact will be modest compared with interest rates, supply and population growth.
CBA projects that investor lending volumes over 2026 could ease to nearly half of the peaks recorded in late 2025, with lower expected returns, tighter borrowing capacity and more buyers choosing to wait and see.
Investor credit growth is forecast to trough at around 3.5 per cent, with owner-occupier lending also expected to slow – though Mr Saunders and Mr Clarke say that softening is more closely linked to higher interest rates than the tax changes, with owner-occupier growth forecast to trough at around 5.5 per cent.
However, CBA views this tax-driven adjustment as a structural reset rather than a permanent downturn.
“Home prices should stabilise and lift in 2027 as lower prices and interest rates see borrowing constraints ease and higher rental yields bring buyers back into the market,” they wrote.
Over the longer term, they said the tax changes are likely to produce a one-off adjustment to prices rather than a lasting change in growth, with housing outcomes continuing to be driven more by interest rates, supply and population growth.
Westpac has outlined a more moderate contraction, forecasting Sydney property values to dip around 3 per cent over 2026 before entering a modest recovery cycle in 2027, as reported in Westpac Market Analysis.
Westpac economists point to lower overall transaction volumes and extended days on market, while emphasising that tight rental vacancy rates, high construction costs, and sustained population growth will prevent deeper structural losses across established housing.
For agency principals and sales agents, these market shifts present strategic opportunities to guide client conversations.
The compression of values at the upper end of the market has significantly narrowed the price gap required for existing homeowners to upsize into prestige locations or larger family residences.
Additionally, keeping vendors informed with hyper-local suburb data helps set realistic reserve expectations during listing campaigns, ensuring properties remain competitive as stock moves through the spring season.
Major Bank Sydney Housing Outlook Summary
| Bank | 2026 Price Forecast | Key Market Drivers | Recovery Timeline | Official Announcement |
| ANZ | -9.9% (Peak-to-trough -14.5%) | Rate sensitivity, investor tax shifts, top-quartile pullbacks | Gradual rebound expected in 2027 | ANZ Forecast Report |
| Commonwealth Bank | -2.0% to Flat | Halving investor credit growth, serviceability constraints | Price stabilisation and lift projected for 2027 | CommBank News Alert |
| Westpac | -3.0% | Subdued turnover, lower auction clearance rates | Recovery (+2.0%) forecast entering 2027 | Westpac Market Pulse |