Australia's Real Estate Market: Where It Stands Today and What the Next 10 Years May Hold

Australia's property market has long been a national obsession, and 2026 is no exception. After a turbulent few years of pandemic-era booms, rapid interest rate hikes, and now a fresh cooling phase, the country's housing sector sits at a genuine crossroads. Understanding where the market is today — and the structural forces that will shape it over the next decade — matters for homeowners, investors, renters, and policymakers alike.

The Current State of Play (2026)

The market is showing a clear two-speed pattern. Perth, Brisbane, Adelaide, and Darwin continue to post strong gains, while Sydney and Melbourne have moved into a period of price softness. Cotality's national home value index recorded its largest monthly fall in mid-2026 since 2022, driven largely by declines in Sydney and Melbourne, even as Perth, Adelaide, and Brisbane continued to notch gains, albeit at a slower pace than the previous year.

Major bank forecasters have downgraded their 2026 expectations. ANZ Research now expects capital city prices to rise only around 2.8% in 2026 (down from an earlier 4.8% forecast), citing higher interest rates and affordability constraints, with Sydney and Melbourne underperforming while structurally tight markets like Adelaide, Brisbane, and Perth stay more resilient. Westpac has gone further, now expecting national dwelling price growth to stall roughly flat for the calendar year, pointing to recent rate rises and new tax settings on investment property as key drags. KPMG's outlook remains more upbeat, projecting national house price growth around 7.7% for 2026, with Perth (12.8%), Brisbane (10.9%), and Darwin (10.5%) leading the way, while Sydney and Melbourne see much more modest gains.

Rental conditions remain historically tight. National vacancy rates are hovering around 1.7%, and median weekly rents nationally sit close to $681, up roughly 5% year-on-year, with Sydney the most expensive capital and Hobart the cheapest. This tightness reflects a simple imbalance: population growth has consistently outpaced new housing supply for most of the last decade.

Policy has also shifted the landscape. Changes to capital gains tax and negative gearing announced in the May 2026 Federal Budget have reduced the relative appeal of investing in established dwellings, while carving out exemptions for newly built homes — a deliberate attempt to redirect investor capital toward new supply. At the same time, an expanded 5% deposit scheme for first-home buyers has pulled forward demand at the more affordable end of the market.

The Structural Forces That Will Shape the Next Decade

Short-term price movements get the headlines, but the 10-year story is really about three intersecting forces: population growth, housing supply, and interest rate cycles.

Population growth remains strong, even as it slows. Australia's population is projected to reach roughly 31.5 million by 2035–36, adding more than 300,000 people a year through the back half of the decade, even as net overseas migration eases from its post-pandemic peak. Western Australia, Queensland, and Victoria are expected to grow fastest, while New South Wales will remain the most populous state.

Supply is unlikely to catch up any time soon. The National Housing Accord set an ambitious target of 1.2 million new homes between mid-2024 and mid-2029 — around 240,000 completions a year. Actual delivery has consistently fallen short: the National Housing Supply and Affordability Council forecasts a shortfall of around 262,000 homes against that target, with construction constrained by labour shortages, high material costs, and complex planning systems. Even optimistic scenarios see Australia delivering only 83–86% of what's needed. This structural undersupply is the single biggest reason most economists expect prices and rents to keep trending upward over the long run, even through short-term corrections.

Interest rates will keep driving the cycle. The RBA's rate settings have swung markets dramatically — cuts in 2025 fuelled a sharp rebound in prices, while renewed hikes in 2026 have cooled Sydney and Melbourne in particular. Over a 10-year horizon, rates will likely move through further cycles, but the structural supply shortage means downturns are expected to be shallower and shorter-lived than in markets with adequate housing stock.

What a 10-Year Forecast Looks Like

No forecast this far out can be precise, but combining current data with historical patterns points to a few reasonably confident themes:

• Long-run growth, but at a more moderate pace than the last decade. Australian house prices have historically tripled roughly every 20 years, equivalent to about 6% average annual growth. Most analysts expect this broad pattern to continue, but with more moderation than the extraordinary post-pandemic surges, particularly in already-expensive markets like Sydney and Melbourne.
• Regional and outer-suburban markets outperforming capital city cores. Affordability pressure is pushing both buyers and investors toward regional centres and outer suburbs, a trend expected to persist as capital city entry prices climb further out of reach for average incomes.
• A continued shift toward the smaller capitals. Perth, Brisbane, Adelaide, and Darwin have benefited from stronger population inflows and relatively better affordability. Barring a major shock, this rebalancing away from Sydney and Melbourne's historical dominance is likely to continue for at least several more years before affordability pressures build up in these markets too.
• Rental growth staying elevated. With vacancy rates near 20-year lows and new dwelling completions structurally behind demand, rents are expected to keep rising faster than long-term averages through at least the late 2020s, even if that growth eventually moderates as supply gradually improves.
• Policy as a genuine wildcard. Tax reform (negative gearing and capital gains tax changes), the National Housing Accord's construction incentives, and state-level planning reform could all meaningfully alter the supply-demand balance over a decade — more so than in past cycles, given how central housing affordability has become to national politics.
• Commercial and living-sector real estate diversifying further. Beyond housing, sectors like industrial and logistics property, and purpose-built rental ("living") assets, are expected to see growing institutional investment as population growth and undersupply support rental income durability.

The Bottom Line

Australia's property market enters the second half of the 2020s in a more complicated state than in previous cycles — a genuine two-speed market shaped by diverging city fortunes, a landmark shift in investment tax settings, and an intensifying rental crisis. But the structural fundamentals that have underpinned Australian property for decades — sustained population growth, chronic undersupply, and a national preference for housing as the primary store of wealth — remain firmly intact. For most of the next 10 years, that combination points to a market that keeps grinding higher over the long run, even as it moves through the inevitable shorter-term corrections along the way.

This article reflects market data and forecasts available as of mid-2026. Real estate forecasts are inherently uncertain and can be affected by interest rate changes, government policy, migration levels, and broader economic conditions. This content is general information only and does not constitute financial or investment advice.

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Sources

• KPMG Australia, Residential Property Market Outlook, January 2026
• ANZ Research, Housing price growth to slow with higher rates, April 2026
• Westpac IQ, Housing forecast update, May 2026
• Propertyology, 2026 Property Market Outlook
• Collings Real Estate, Australian Property Market Outlook 2026
• HtAG Analytics, Australian Property Market Forecast 2026
• Cushman & Wakefield, Australia Outlook 2026
• National Housing Supply and Affordability Council, State of the Housing System 2025
• Australian Government Centre for Population, 2025 Population Statement
• Australian Bureau of Statistics (ABS) building and population data