2026 Housing Market Outlook - What Domain's Forecast Means for Investors

Australia’s housing market is entering a phase driven less by sentiment and more by deep structural forces. Domain’s Forecast Report 2026 projects that prices and rents will reach record levels next year, supported by easing financial conditions, rising incomes and significant policy momentum. Greenrock breaks down the key insights and what they signal for buyers and investors.

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1. Prices expected to peak early in 2026

Domain forecasts all capital cities will hit new record highs by the end of 2026. Sydney and Melbourne are expected to lead growth, consistent with their historic sensitivity to interest rate movements.

• Sydney: Median house price projected to reach $1.92m, roughly $173k above current levels.
• Melbourne: Expected to climb to $1.17m, completing a full rebound from recent downturns.
• Combined capitals: House prices up 6%, units up 5%.

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2. Policy expansion will lift demand — especially early

The expanded First Home Guarantee Scheme is set to play a major role in early-cycle activity. Domain estimates it could lift prices 3.5% to 6.6% in the first 12 months — the equivalent impact of roughly 125 bps of rate cuts.

Key changes include:

• Removal of income caps and placement limits
• 5% deposit purchases with no LMI
• Higher price caps across major cities

Domain expects this surge to moderate after the first year as demand normalises.

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3. Units to outperform in key markets

Affordability pressures and location priorities mean units are forecast to outpace houses in Brisbane, Adelaide and Perth.
Brisbane
• House growth: 5%
• Unit growth: 7%

Adelaide
• House growth: 4%
• Unit growth: 5%

Perth
• House growth: 5%
• Unit growth: 6%

Drivers include lower entry prices, lifestyle preferences and infrastructure influence — particularly pronounced in Brisbane as the 2032 Olympics approach.

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4. Rents to hit new highs, though pressure may ease slightly

Rental prices are forecast to reach record levels nationally in 2026, but the pace of growth is expected to moderate as supply improves.

• House rents: +3% across combined capitals
• Unit rents: +4%, reflecting affordability constraints
• Vacancy rates remain tight but are expected to lift gradually as new stock enters the market.

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5. Interest rates: easing, but carefully

While lower rates will support momentum, the RBA is expected to maintain a cautious stance. Expectations for significant post-2025 cuts have softened as inflation remains a key risk.

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6. Key risks to watch

Persistent inflation
• Risk: Inflation staying higher for longer
• Impact: Could delay rate cuts and slow buyer demand

Construction bottlenecks
• Risk: Labour and material constraints
• Impact: Limits supply improvements, maintains pressure on prices and rents

Affordability ceilings
• Risk: Buyers reaching borrowing or repayment limits
• Impact: Could slow growth in cities that have risen sharply (e.g. Brisbane, Perth)

Investor re-entry shifts
• Risk: Investors returning aggressively to value segments
• Impact: Increases competition for affordable homes and units

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7. Strategic implications for investors

The overarching theme: success in 2026 hinges on strategy, not timing.

Investors should prioritise:
✔ Targeting locations with enduring structural demand
✔ Optimising lending structures ahead of rate shifts
✔ Securing properties aligned with evolving buyer preferences
✔ Balancing yield and growth — especially in unit-led markets

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Final thought

Domain’s forecast makes one thing clear: the next cycle will favour investors who move early, think strategically and remain disciplined. Those who position ahead of market momentum — rather than react to it — will be best placed as Australia’s housing landscape transitions.

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