Domain's 2026 Forecast Report expects home prices to break new records across every capital city by the end of next year.
The report said after years of affordability strain and tight supply, the next phase will see lower interest rates and higher household incomes drive price growth nationally.
It will also be marked by a wave of first homebuyer demand under the federal government's expanded 5% Deposit Scheme.
Initial data shows home values in the first month of the expanded scheme saw their strongest monthly gain in more than two years.
The Domain report forecasts the scheme could see home prices lift by up to 6.6% in its first year by pulling forward first homebuyer demand.
What's in store for the capital cities?
With home prices forecast to reach record levels across the board, here are the house and unit price growth forecasts for 2026:
Highlights
- Sydney house prices are forecast to rise 7% to just below the $2 million mark, out of reach for many buyers
- Melbourne market tipped for strong recovery
- Brisbane, Adelaide, Perth to see house price growth ease to 4-5% with units values to see 11-13% growth as buyers seek affordability, although this growth is expected to moderate by the end of the year
- Canberra market to return to record highs
Rents too are expected to reach record levels in every capital city, led by Sydney and Brisbane where house rents are expected to increase by 4% and units rents by 5%.
2026 tale of two halves
But most of that price momentum is expected to be in the first half of 2026 as the market rides the tailwinds of lower interest rates, rising incomes, and heightened first homebuyer activity.
The report found the second half of the year will see growth moderate as affordability pressure starts to bite, particularly in the mid-sized cities of Brisbane, Adelaide, and Perth where prices have surged in recent years.
The end of 2026 is also expected to see new housing supply enter the market as building activity picks up.
This, coupled with RBA caution on further interest rate cuts, should see the market move towards "more balanced conditions" by the end of 2026.
What will the 2026 property market mean for you?
First homebuyers
The expanded 5% Deposit Scheme will see a rush of first homebuyers competing with investors, injecting "new energy" into the market, the report predicts.
The report said the 3.3-6.6% increase in home prices linked to the scheme will be equivalent to the effects of "five RBA cuts at once".
See also: Expanded home guarantee fuelling home buyer surge, supports price gains
However, the effect is likely to fade beyond the first year as demand normalises, consistent with Treasury modelling that shows only a 0.5% cumulative rise in national prices over six years.
Investors
Investors will continue to see strong returns but with a shorter window.
High rental yields and early-year capital growth is expect to add fuel to record investor lending, though gains are expected to ease as new supply and competition builds later in 2026.
Domain's senior economist Joel Bowman (pictured above) told the Savings Tip Jar podcast investors have been drawn into the market by a combination of factors.
"[There are] falling borrowing costs this year, as well as low vacancy rates that we're seeing across the country that's tilted the market in favour of landlords," Dr Bowman said.
"I think some investors may have also been pre-empting the rise in price likely to stem from the government's guarantee scheme as well, so they have been quite on the money wanting to get in ahead of those first-time buyers."
Listen to the full chat with Dr Bowman on record investor lending and where it could be heading.
Upgraders/downsizers
Those looking to sell then buy are heading into two different markets.
Upgraders, particularly in Sydney and Melbourne, are likely to face steeper prices and stronger competition.
Downsizers stand to benefit from higher sale prices and a larger pool of suitable homes by the end of the year.
However, more affordable market segments, especially units, are expected to see elevated price growth, with strong competition at that end of the market.
Renters
Renters will continue to do it tough, with rents expected to accelerate again after a brief pause, particularly in Brisbane, Adelaide, and Perth, as demand continues to outpace supply.
Watch the full Savings Tip Jar podcast episode, featuring Domain senior economist Joel Bowman, via YouTube.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
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5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
