May 2026
Growth in Australian housing values has eased considerably as inflation and the war in Iran prompt the Reserve Bank of Australia (RBA) to turn hawkish and resume rate hikes.
Opportunities are likely to be found at the cheaper end of the housing market, which is seeing far stronger price growth due to Australia’s scarcity of affordable, entry-level homes.
Sydney and Melbourne home prices slide
Growth in Cotality’s national home value index came in at 0.3 percent for April, its lowest point since January 2025.
Nationwide growth in Australian housing prices was held back by the poor performance of the Sydney and Melbourne property markets, where dwelling values slid 0.6 percent over the month.
While the other capital cities continue to see home prices rise, the pace of growth has fallen across the board. Perth came in first with a 2.1 percent rise, followed by Darwin with a 1.3 percent increase, and Brisbane with a 1.2 percent lift.
Tim Lawless, Cotality’s research director, said Australia’s easing property market is expected to come under even greater pressure in the near-term, with the RBA resuming a tightening stance in response to the resurgence of inflation driven by the war in Iran and oil price shocks.
“The housing market was losing momentum from late last year as affordability and serviceability constraints weighed on demand,” he said.
“Now we have the additional downside pressure of higher interest rates, sentiment has fallen off a cliff, and rising inflation is set to drive the cost of debt even higher.”
On 5 May, the RBA announced it would hike its cash rate target by 25 basis points to 4.35 percent, due to concerns over a pickup in inflation as fuel and commodity prices rise.
Negative gearing budget changes create market uncertainty
This year’s much-anticipated federal budget has proposed a major change to Australia’s tax regime that could significantly impact the nationwide housing market.
Treasurer Jim Chalmers announced plans to remove the 50 percent capital gains tax (CGT) discount introduced by Peter Costello in 1999, a policy widely seen as helping drive the rise of negative gearing among Australian property investors.
Critics say the policy reshaped investor behaviour by making property investment more tax-effective, increasing competition for lower-priced homes and making it harder for first-home buyers to enter the market.
If legislated, the changes are expected to take effect from July next year, with Treasury estimating the reforms could help an additional 75,000 Australians become owner-occupiers over the coming decade, following years of declining home ownership rates.
Opportunities lie with cheaper homes
Developers should keep a sharp eye on the increasingly varied performances of Australia’s many different property sub-markets, with cheaper housing expected to hold up better under the pressure of higher interest rates, particularly amid uncertainty surrounding the federal budget’s proposed changes to the CGT discount.
Michael Yardney, founder of Metropole Property Strategists, indicated the Australian property market has fragmented into a slew of highly varied micro-markets all moving in different directions.
These property sub-markets aren’t just spread across Australia’s many geographic regions, they often co-exist, with home prices in one area performing very differently to those in directly adjacent areas.
“The Australian property market isn’t just moving in different directions across cities,” Yardney writes. “It’s splitting within the same city, sometimes within the same suburb.”
Nerida Conisbee, chief economist at Ray White, uses the expression “K-Turn” to describe the stark divergence in the performance of Australia’s housing micro-markets.
Given worsening home affordability in the wake of sustained growth in dwelling values, premium Australian residential properties are struggling to achieve price gains.
Cheaper housing in the same areas continues to see strong price growth, as the very same affordability challenges heighten demand for down-market properties.
According to Conisbee, since 2023 the Sydney housing market has exemplified this divergence in home price performance.
Cheaper housing at the 25th percentile of the Sydney market has seen price gains twice as rapid as those of more expensive properties at the 75th percentile.
This means that even if interest rate hikes induce a downturn in the housing market, prices for cheaper properties could remain robust due to Australia’s worsening scarcity of affordable entry-level homes.
Yardney points out that over the past decade, national house sales under $750,000 have plunged, from around 248,000 in 2015 to just 153,000 in 2025.
As a consequence, developers and investors should pay close attention to opportunities at the cheaper end of the market, keeping in mind that these opportunities could be found within larger regional markets that are posting an overall sluggish performance.
While cheaper housing shows stronger price growth, Sydney’s development economics make this the hardest segment to deliver profitably. Building an apartment now costs $608,200 on average, up 90% since 2019, making entry-level product unviable at prices the market can absorb. Sydney developers have rationally focused on the downsizer and premium segment, where asset-rich baby boomers rightsizing into larger apartments can absorb delivery costs. The economics work; the sentiment fits.
Whether the 2026 budget changes this calculus remains to be seen. Limiting negative gearing to new builds and a new $2 billion Local Infrastructure Fund may improve feasibility at the margins, but construction cost barriers go unaddressed. Treasury’s own modelling suggests roughly 7,500 additional first-home purchases per year over the next decade is meaningful, but modest against the scale of Sydney’s undersupply. As CrowdProperty’s David Ingram puts it: “The 2026 budget takes some steps in the right direction — limiting negative gearing to new builds and committing $2 billion to local infrastructure are welcome signals. But none of this touches the core problem: it still costs more to build an apartment than most buyers can pay. Until we solve that equation, the supply we need won’t get built.” For developers, the smarter near-term play still points firmly toward the mid-to-upper market.
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
April 2026
Australia’s home prices continued to post overall gains in March, with the mid-tier capitals compensating for slight value declines in Sydney and Melbourne.
Untamed inflationary pressure, compounded by the War in Iran, will create headwinds for home prices in the form of further rate hikes from the Reserve Bank of Australia (RBA). However, investors and developers could still find opportunities for home price growth in the nation’s more affordable regions.
Mid-tier cities lead home price growth
Divergence in the performances of Australia’s multiple housing markets has become further pronounced, with mid-tier capital cities outside the south-eastern coast posting robust gains to drive nationwide growth in dwelling values.
Cotality’s national home value index posted an increase of 0.7 per cent in March, bringing the total increase for the first quarter of 2026 to 2.1 per cent.
The mid-tier cities saw growth of 1.2 per cent or more in month-on-month terms in March, just as Sydney and Melbourne saw declines of 0.1 per cent and 0.2 per cent respectively.
Perth led March gains with a 2.5 per cent increase, followed by Brisbane with a 1.8 per cent gain, Darwin with a 1.6 per cent rise, and Adelaide with growth of 1.2 per cent.
Tim Lawless, Cotality’s research director, highlighted the divergence in home price movements between Australia’s major population centers, with Sydney and Melbourne now struggling to stay afloat.
“Since the end of November 2025, Melbourne values have retreated by -0.9 per cent and the Sydney market is down -0.4 per cent,” Lawless said.
“The softer trend in values coincides with falling auction clearance rates and a pickup in advertised supply, providing buyers with more choice and less urgency at the negotiation table.”
Resurgent inflation puts rate cut hopes on hold
The latest data from the Australian Bureau of Statistics (ABS) points to the persistence of inflationary pressure throughout the economy.
The ABS’ consumer price index (CPI) for the 12 months to February came in at 3.7 per cent. Only slightly below the rate of 3.8 per cent posted in January, and still considerably above the band of 2-3 per cent inflation that is generally preferred by the world’s monetary authorities.
The RBA tends to focus on the trimmed mean CPI as a more reflective measure of inflation. That metric came in at 3.3 per cent for February, also indicating the persistence of robust inflationary pressure.
Sally Tindall, insights director at Canstar, said the latest data makes it almost certain that the RBA will push through with a third rate hike – particularly given the further inflationary impact created by the War in Iran.
“CPI figures offer little reprieve in the fight against inflation,” Tindall said.
“There’s no calm before the storm, but instead, persistent inflation that is set to spike once the Middle East conflict hits next month’s data, just six days out from the RBA’s next meeting.”
A third rate hike would bring the cash rate to its highest level since November 2011, as well as result in a 7.4 per cent increase in the monthly repayments of a typical mortgage borrower.
K-shaped economy means fragmentation in price movements
Persistent inflation and the ensuing raft of rate hikes create major headwinds for Australian property prices by raising the cost of borrowing for homebuyers.
The fundamentals of the Australian housing market nonetheless support further gains in dwelling values, as supply fails to keep pace with demand that continues to rise on the back of strong migration.
One of the results of this is now the huge variation in the health and performance of Australia’s housing markets, both between regions and within regions themselves.
Nerdia Conisbee, chief economist at Ray White, has referred to this divergence in price performance as a “K-Turn” in the housing market, with cities like Perth vastly outpacing Sydney and Melbourne.
While price growth for premium properties has petered out with waning affordability, Australia’s cheaper home markets continue to see robust gains as buyers scramble for deals.
This trend has been further exacerbated by government measures to support first-time homebuyers – such as the expansion of the federal government’s 5 per cent deposit guarantee scheme in October last year, which steps up demand for cheaper properties.
Investors and developers need to keep an eye on this fragmentation of the Australian property market, as it will mean different risks and opportunities for different areas.
Affordable areas within cities could continue to see price gains from new entrants to the property market, even if inflation drives interest rates higher.
In terms of broader regional splits, South Australia continues to show promise as a redoubt of affordable housing, while Melbourne and Darwin have resumed a strong growth trajectory, after previously underperforming compared to Australia’s other capital cities.
Australia’s smaller capital cities have emerged as the clear winners in home price growth since the start of 2026, and they’re playing an outsized role in driving nationwide momentum. At the same time, Sydney and Melbourne continue to face real headwinds as affordability constraints weigh on the country’s two largest markets.
“At CrowdProperty, we’re seeing this play out firsthand – project loan applications and settlements have picked up noticeably in cities like Adelaide, Hobart and Fremantle, where demand remains strong for well-located townhouses and apartments that people genuinely want to live in and can actually afford.
Despite the potential for energy-related inflation and further rate hikes to create near-term challenges, Australian housing prices will continue to find support from the fundamental shortfall of supply relative to demand. That said, investors and developers need to stay keenly aware that this story will play out very differently across Australia’s many regional and sub-regional markets. Understanding the real local dynamics is what separates good projects from great ones – this can vary from street to street.”
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
March 2026
The Reserve Bank of Australia’s (RBA) decision to hike interest rates last month did little to slow the momentum of the housing market in many parts of the country, with mid-sized capitals still posting robust price gains.
Further cuts from the RBA are anticipated however, which could slow – although not completely stymie – nationwide growth in dwelling values in 2026.
Australia divided into two-track housing market
Australia’s housing market continued to post gains in February, with Cotality’s National Home Value Index (HVI) seeing an increase of 0.8 per cent.
The pace of gains in dwelling values was sharply divided, however, with Australia splitting into two broad segments in terms of growth rates.
The two largest Australia cities of Sydney and Melbourne have seen growth in home prices stall completely, yet other capital cities outside of the south-eastern coast continue to see healthy increases.
Perth led growth in home values with a 2.3 per cent rise in February, while Brisbane, Adelaide and Hobart all posted gains of over 1 per cent.
Tim Lawless, Vitality’s research director, said these cities were set to see further gains on the back of low home inventories.
“The clear slowdown in housing conditions across Sydney and Melbourne could signal an easing in growth conditions elsewhere down the track, but for now, the mid-sized capitals continue to see support from extremely low inventory levels, which is boosting the growth in values,” Lawless said.
RBA expected to hike further
February’s home price gains arrived just as the RBA resumed a hawkish trajectory, announcing a hike of 25 basis points that brought its cash rate target to 3.85%.
The RBA’s board cited concerns over the pick up in inflation since the start of 2026, projecting that it will remain above the 2 – 3 per cent target range for some time to come.
The war in Iran and an abrupt uptick in oil prices further compounded the RBA’s concerns, with its board deciding to implement another hike of 25 basis points in March that took the cash rate to 4.1%.
As with other major asset classes, the upcoming performance of housing prices hinges heavily upon the future decisions of the RBA.
RBA governor Michele Bullock has warned of the possibility that a recession could be the byproduct of efforts to contain inflation, while government modelling indicates that inflation could become much stickier as a result of the rise in oil prices.
Given the fundamentals of the Australian housing market, even hawkish monetary policy won’t be enough to stymie upward pressure on dwelling values. It will, however, dial back the pace of growth compared to 2025.
Melbourne seen as new hub of opportunity
Melbourne stands apart from Australia’s other major cities with its recent sluggish growth in dwelling values.
Victoria’s tax regime is seen as holding back home prices, with the state government levying some of Australia’s highest stamp duties.
Anne Flaherty, senior economist with realestate.com.au, said that Victorian property owners pay the highest taxes in Australia, serving as a major disincentive for housing purchases.
The ongoing underperformance of Melbourne housing prices could soon make the city one of the most appealing destinations for residential investor demand in Australia, however. This is especially the case given breakneck price growth in other major cities which is severely hampering affordability.
“Melbourne’s now the cheapest capital city behind Hobart and Darwin,” Flaherty said. “So a lot of investors are thinking, ‘Yes, the tax disincentives are real, but Melbourne’s never been cheaper than Adelaide or Perth or Brisbane.”
Home prices in Melbourne are on track to also find support from strong fundamentals. Government forecasts point to Melbourne seeing some of Australia’s strongest urban population growth, with expectations of a 1.5 percent increase per annum for the next decade.
At the same time, building approvals and housing starts have dived in Victoria, with developers deterred by the state’s onerous tax regime.
Flaherty expects this to create a “dire shortage of housing” over the long-term, which will reverse Melbourne’s status as an underperforming market and cause investors to “come flooding back.”
“While inflation remains a concern for the Australian economy and future hikes from the RBA will create headwinds for real estate, the fundamentals of the housing market are such that further gains in home prices are almost inevitable.”
“This is highly evident in Melbourne, where the supply of new housing will fail to keep pace with growth in demand as the city’s population continues to readily expand.”
“When looking at different regions of Australia for opportunities, developers should really keep their eyes on demographic factors, as well as the regulatory considerations that could affect housing supply.”
If you have a property project and you are looking for an experienced finance debt partner to help you get off the ground, then reach out to our expert property team at CrowdProperty.
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Quay.
February 2026
Australia’s housing prices continued to edge higher in December and January, on the back of momentum created by government policies to support new homebuyers.
The Australian housing market is expected to see more robust gains in 2026 despite worsening affordability and the Reserve Bank of Australia’s (RBA) hawkish turn, due to the prevailing imbalance between supply and demand.
December home prices continue to rise
Cotality’s national Home Value Index posted a rise of 0.6 percent in December, for its smallest increase in five months. Growth rebounded slightly since the start of the year, rising to 0.8 percent in January,
Sydney and Melbourne weighed considerably on the tepid growth of home prices at the end of last year, with both cities posting declines in dwelling values of -0.1 percent in December.
They continued to hold back headline numbers in January, with gains of 0.2 percent in Sydney and 0.1 percent in Melbourne.
In spite of softer growth towards the end of the year,, the Home Value Index saw an increase of 8.6 percent in 2025. This was its strongest calendar year increase since 2021, when low interest rates and policy support to deal with the Covid pandemic boosted prices by 24.5 percent.
Tim Lawless, Cotality’s research director, said the supply-demand mismatch is a key driver of ongoing home price gains, despite affordability challenges and the RBA’s withdrawal from a cycle of rate cuts.
“Despite the most unaffordable conditions on record in many cities, along with a rebound in cost of living pressures, we are still seeing a broad-based rise in housing values,” he said.
“The ongoing capital gains reflect persistently low inventory in the face of above average housing demand.”
Housing market to stay buoyant in 2026
On 3 February, the RBA brought an end to its rates cutting cycle, with its board announcing a 25 basis point increase to the cash rate target to 3.85 percent.
Despite major concerns surrounding the impact of the RBA’s hawkish turn on mortgage borrowers, leading economists still believe that Australian housing values are on track for further gains in 2026.
KPMG forecasts that home prices will increase 7.7 percent in 2026, driven primarily by the ongoing shortfall in supply for houses relative to demand.
Dr Brendan Rynne, KPMG chief economist, said the upward pressure on property prices created by this supply-demand mismatch is being further exacerbated by government policies to support home buyers.
These policies – such as the 5 percent Deposit Scheme – are overcoming the headwinds to further price gains created by worsening affordability and higher interest rates.
“Despite the fact that there aren’t enough houses being built, buyers in these cities are prepared to pay more than the supply shortage would justify,” Rynn said.”
“As a result, at the entry level, the market will continue outperforming this year, with more young people seizing the opportunity to break the rent cycle and lock in their first home sooner, intensify competition at the affordable end and ensuring prices remain firm.”
KPMG sees Perth leading home price gains in 2026, with a projected rise of 12.8 percent. Brisbane and Darwin are also forecast to see robust increases of 10.9 percent and 10.5 percent respectively.
The consultancy sees home price growth in Sydney and Melbourne at far lower, yet still robust levels, of 5.8 percent and 6.8 percent respectively.
“Worsening affordability and rate hikes from the RBA won’t be enough to dampen price growth on the housing market.”
“Supply still falls much too short of demand, with little chance of improvement on the horizon.”
Opportunities in remaining affordable urban areas
John Lindeman, CEO, Property Power Partners, expects first home buyers to play a key role in driving opportunities in the property market in 2026, thanks to the 5 percent deposit scheme.
This means an influx of demand into those key urban locations that still remain affordable despite the Covid-era home price boom.
“First home buyer numbers are surging,” Lindeman said. “The Federal Government’s 5 percent deposit scheme has launched thousands of first home buyers into the market.
“Investor numbers are also increasing, and both of these groups are concentrating demand into the most affordable locations.
“This is having the greatest impact in Sydney and Melbourne, where demand from
both investors and first home buyers is pushing up prices in the most affordable suburbs.”
What does this mean for SME Property developers?
There is certainly an optimistic demand story in 2026 — prices rising, first home buyers will be more active thanks to the 5 percent deposit scheme, and a persistent supply shortage. But for SME developers starting a project today, the opportunity is real but uneven. Where you build, what you build, and when you lock in your contractor matters enormously.
David Ingram from CrowdProperty says that he not only sees end values rising, but so are our developers build costs, approval timelines, and financing costs (the RBA just hiked to 3.85 percent). “Margin compression is a genuine risk if feasibility isn’t stress-tested carefully.”
Backed by institutional capital, CrowdProperty has recently expanded it’s offering to WA with a number of projects about launch in the West. This appears to be a standout market with local developers seeing “the end values and rents in Perth are now rising faster than the cost to construct and deliver for the first time in living memory” which is a genuinely good scenario for infill property developers. Perth leads capital city forecasts with house prices expected to rise nearly 13 percent and units by 11.6 percent in 2026, driven by the fastest population growth in the country and very limited housing supply.
If you have a property project and you are looking for an experienced finance debt partner to help you get off the ground, then reach out to our expert property team at CrowdProperty.
CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.
Opinions or views expressed represent the thoughts of individuals and not those of CrowdProperty or Cache.
