Australia’s Housing Market Set for 7.7% Growth by 2026

Australia's housing market is forecast to grow 7.7% nationally by 2026, according to KPMG modelling that has Perth and Brisbane leading capital city growth and rents rising faster than the long-term average. The increase is expected to be driven by strong market momentum carried over from late 2025, the expanded 5% Deposit Scheme for first-home buyers, continued population growth and a persistent shortage of housing supply. Interest rates remain the key uncertainty behind the forecast, likely to determine how much of this growth actually plays out. For property investors, homebuyers and renters, the practical question is less whether prices rise and more how unevenly that growth is spread across cities and the year.

Key City Forecasts for Houses in 2026

Regional variations in growth potential are also evident, with notable forecasts across major Australian cities. Here’s how the key cities are expected to perform:

• Perth: Leading the charge with a remarkable growth of 12.8%.
• Brisbane: Following closely behind, expected to rise 10.9%.
• Darwin: Projected growth of 10.5%.
• Adelaide: A moderate increase of 8.2%.
• Melbourne: Growth forecast at 6.8%.
• Sydney: Anticipated growth at 5.8%.
• Hobart: A modest projection of 5.4%.
• Canberra: Expected to rise by 4.7%.

Additionally, unit prices are anticipated to increase nationally by 7.1%, with similar trends in cities such as:

• Darwin: 13.4% growth in unit prices.
• Perth: 11.6% growth in unit prices.

Supporting Factors Behind the Growth Forecast

The impressive growth projections in the Australian housing market are underpinned by a variety of factors that drive demand while simultaneously impacting supply.

Demand Drivers

Several key demand drivers are contributing to the growth outlook:

• First-Home Buyer Schemes: The expanded 5% Deposit Scheme allows first-home buyers to enter the market in high-demand areas such as Sydney, facilitating competition among entry-level buyers.
• Population Influx: Cities like Perth and Brisbane are experiencing substantial population growth, further fueling the demand for housing.
• Infrastructure Investments: Ongoing infrastructure development in regions like Darwin enhances livability and attracts more residents, thereby intensifying competition in the housing market.

Supply Constraints

While demand is on the rise, the housing supply is facing significant constraints:

• Low Housing Construction: A sustained lack of new housing construction is exacerbating the supply issue and pushing prices upward.
• Labor Shortages: Construction labor shortages have hindered the ability to meet rising demand, leading to increased project costs.
• Elevated Costs: Higher costs of materials and labor continue to create price pressures in the housing market, unable to match expanding demand.

Impact on Rental Markets

Alongside rising house prices, the rental market is also poised for changes. Rents are expected to increase by 3.5% annually through 2026-2027, surpassing the long-term average. This rise can be attributed to:

• Tight Vacancy Rates: A limited availability of rental properties contributes to upward pressure on rental prices.
• Demand Surges: Increased demand for rental properties—especially in urban areas—stems from the growing population and limited entry-level home ownership options.

Market Phases: From Stimulus to Moderation

The Australian housing market is expected to experience different phases of growth as we transition through 2026:

• Early 2026: A surge in buyer activity driven by various government incentives is anticipated to escalate market momentum.
• Later 2026: Growth is likely to moderate due to affordability limits and rising interest rates, especially for potential homebuyers facing increased costs.

Complementary Analyses

Other market analyses align with KPMG’s growth projections. For instance:

• Property Update: Expects solid rises, fueled by stable interest rates and ongoing incentives for buyers.
• Propertyology: Predicts growth exceeding 6% in more robust economies like Adelaide, Brisbane, and Perth.
• Sydney: May experience moderated growth amidst recent market slowdowns.

Conclusion

In summary, the Australian housing market is set for a remarkable rebound, with KPMG forecasting a 7.7% increase in house prices by 2026. The underlying factors for this growth, including increased demand driven by government initiatives, infrastructure developments, and population growth, alongside persistent supply constraints, present a complex landscape. Investors, homebuyers, and renters alike should navigate this evolving market with a keen eye on the trends and forecasts that shape their housing decisions. Property investors weighing up their next move should speak to our property investment specialists about what these forecasts mean for their portfolio.

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Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.