Australia's property market is poised for an unprecedented surge, with experts predicting record-breaking prices across every capital city by the end of 2026. This remarkable growth trajectory is being fuelled by a combination of falling interest rates, expanded government support schemes and rising household incomes.
Capital Cities Lead Property Charge
According to fresh forecasts released by property portal Domain, Sydney is expected to spearhead the national property boom. The harbour city's median house prices are projected to leap 7 per cent to $1.92 million next year, bringing it perilously close to the psychological $2 million barrier that many first-time buyers consider completely unattainable.
Melbourne's market is set for a robust recovery, with prices anticipated to climb $87,000 to reach $1.17 million. Meanwhile, Canberra is forecast to return to its previous peak values, demonstrating the widespread nature of this property resurgence.
Even cities that have already experienced substantial growth aren't immune. Brisbane, Adelaide and Perth, which have witnessed rapid double-digit increases in recent years, are expected to see more moderate but still significant growth of 4 to 5 per cent.
Government Schemes and Economic Factors
Dr Nicola Powell, Domain's chief of research, highlighted that the expansion of the First Home Guarantee Scheme would significantly amplify demand. She warned this could push prices up by as much as 6.6 per cent in the first year alone, with even steeper increases if investors re-enter the market aggressively.
"Australia's housing market is preparing for another strong year," Dr Powell stated. "Demand remains robust, and buyers continue to pursue affordability, particularly in the unit sector, which is expected to outperform in several urban centres."
The research chief also noted encouraging developments on the supply side, with new housing stock beginning to reach the market as construction activity gathers momentum.
Regional Spillover and Economic Outlook
As metropolitan prices escalate, regional areas are experiencing significant spillover effects. Property analytics firm CoreLogic found that regional dwelling values increased by 2.4 per cent in the three months to October 31, representing the highest growth rate in over three years.
Unlike the pandemic-driven regional boom, which was propelled by remote work opportunities and desires for more space, the current growth phase is largely attributable to prospective buyers being priced out of capital city markets.
However, Dr Powell offered some reassurance for long-term market stability. "While prices and rents will remain elevated, slower population growth, rising incomes and a cautious Reserve Bank should help the market move toward more balanced conditions by the end of 2026," she explained.
By the latter half of 2026, affordability constraints are expected to dampen momentum, particularly in Adelaide, Brisbane and Perth where rapid price increases have already stretched buyers' financial capabilities to their limits.
The property expert added: "House price growth in 2026 is forecast to be strongest in Sydney and Melbourne, consistent with their faster response to interest rate changes. Brisbane and Perth are expected to lead unit price growth, albeit at a slower pace than in previous years, as affordability becomes tighter."
