The Australian housing market heads into 2026 with far more momentum than most expected a year ago, but also with an unusual degree of uncertainty. Double-digit annual growth has already returned ahead of schedule, driven by a persistent imbalance between supply and demand, renewed confidence in the larger capitals and strong performances in many regional and lifestyle markets. Whether this pace can be sustained into next year will depend heavily on the interest-rate path, now looking less likely, and the speed at which construction costs continue to moderate.
Through late 2025, the recovery has broadened well beyond the early outperformers. Melbourne and Darwin, both slow to join the upswing, are now firmly back in growth territory. Melbourne has finally surpassed its previous peak, supported by improving affordability and returning population flows, while Darwin’s sharp rebound reflects a chronic shortage of listings and high investor demand. These late-cycle improvements highlight a national market that is increasingly synchronised, even if individual city drivers differ.
Premium markets have also re-entered the picture. Sydney’s high-end suburbs, absent from national growth rankings for several years, are again showing meaningful price gains as prestige buyers return on the back of earlier rate cuts. Perth, meanwhile, continues its extraordinary run, with suburbs such as Cottesloe–Claremont leading national dollar-value growth for a second year, underpinned by population inflows and the strength of Western Australia’s economy. Brisbane remains one of the most consistent performers across inner-city markets.
Lifestyle markets show no signs of losing their appeal. Nowhere is this clearer than the Gold Coast, where unit prices have climbed so rapidly that they now sit above Sydney’s. Strong migration, investor activity and a wave of high-end coastal development have pushed prices into territory that would have seemed implausible only a few years ago. Even with construction costs easing from their peaks, new supply remains constrained, meaning the region is likely to stay undersupplied well into 2026.
The affordable end of the market is also set to remain one of the strongest performers through 2026, supported by the now-expanded five per cent deposit scheme. The removal of income caps and the lift in price thresholds have dramatically broadened eligibility and lowered upfront costs for first home buyers. Demand is already flowing into the bottom quartile, where affordable houses and units are consistently outpacing the wider market across most cities. In places such as regional Queensland, affordable homes are recording annual growth as high as 13.8 per cent, underscoring the intense competition created when incentives collide with limited supply. Treasury modelling may estimate only a modest long-term price impact, but the near-term effects are concentrated squarely at the entry level, where stock is already scarce and demographic demand is strongest. This means the affordable tier is likely to continue outperforming into 2026, particularly in markets where supply pipelines remain thin.
The biggest wildcard remains the timing of rate cuts. Labour-market strength has complicated the outlook, delaying expectations of the first move even as other parts of the economy soften. Retail spending is weak, small-business credit stress is building and consumer sentiment is still mixed. The most decisive shift is occurring in the construction sector, where cooling activity, shrinking pipelines and easing wage pressures suggest a major inflation driver is unwinding. This is a key reason the path to lower rates remains open, however with inflation still too high, it is unlikely in the first half of the year.
Taken together, the fundamentals still point to another year of solid, but more moderate growth. We are likely to move beyond the double-digit phase by mid-2026 unless a rate cut arrives earlier than expected. If it does, the combination of lower borrowing costs, improving construction conditions and persistent supply shortages could easily re-accelerate prices. Without one, the market will continue to grow, just at a steadier and more sustainable pace.