AUSTRALIAN PROPERTY MARKET

2026–2027 Outlook: A Market at a Turning Point

Where prices are heading, what is driving the split between markets, and what buyers and investors should watch next

Market position: 12 August 2026

Key Takeaways

• The RBA left the cash rate unchanged at 4.35% on 11 August 2026.
• Cotality's July 2026 data shows the downturn broadening across several major capitals.
• Higher-value property is taking the largest hit, with upper-quartile values falling more sharply than lower-priced property.
• ABS data shows 18,328 dwellings were approved in June 2026, although approvals do not necessarily translate into completed homes.
• Unemployment was 4.4% in June 2026, while CPI inflation was 3.8%.
• Net overseas migration still added 306,000 people to Australia's population in 2024–25.

1. The Market Has Changed — and the Change Is Becoming Broader

The most important development in the Australian housing market is not simply that some prices are falling. It is that the weakness is spreading beyond the two largest capitals. Cotality's July Home Value Index recorded a 0.7% national decline, its largest single-month fall since December 2022. Sydney and Melbourne remained the weakest major markets, but Brisbane and Adelaide also recorded monthly falls, while Perth's earlier strength had almost disappeared.

Source: Cotality, Home Value Index – August 2026 (July 2026 data).

That matters because the market is moving from a simple "strong versus weak" story to a more complicated adjustment. Affordability is increasingly determining where buyers can participate, while higher borrowing costs are changing the price points and property types buyers can realistically target.

2. City-by-City: A Clearer Two-Speed Market

The divergence is especially important for investors. A national headline can hide very different local conditions. Sydney and Melbourne are dealing with a sharper affordability and borrowing-capacity problem, while Brisbane, Adelaide and Perth are coming off much stronger periods of growth and are now showing signs of moderation.

Macro Snapshot

Latest indicators that matter for housing demand and borrowing conditions.

FY2027 House-Price Outlook: Forecast Ranges

Each range shows the published low-to-high forecast. These are scenarios, not point estimates.

Source: Domain Research, Forecast Report 2027. Forecasts are scenarios, not official government statistics.

3. Interest Rates Are Still the Biggest Short-Term Constraint

The RBA left the cash rate at 4.35% on 11 August 2026. This follows increases earlier in the year, and the latest Statement on Monetary Policy says higher rates have already flowed through to mortgage payments. The RBA also says financial conditions remain somewhat restrictive and demand for new housing loans has declined noticeably.

4. Inflation and Jobs Will Determine What Happens Next

The RBA's next moves will depend heavily on inflation and the labour market. ABS data shows annual CPI inflation at 3.8% in June 2026, while unemployment was 4.4% in June. The labour market is therefore softer than it was at the height of the post-pandemic boom, but not weak enough to remove all inflation concerns.

The latest RBA Statement also notes that market participants were pricing roughly a 50% chance of another cash-rate increase by the end of 2026 at the time of the August Statement. That is a useful reminder: the path to lower mortgage rates is not guaranteed, and the housing market should not be built around an assumed near-term rate cut.

5. Housing Supply: More Approvals, but the Problem Is Not Solved

There is one encouraging supply signal in the latest ABS data. Total dwelling approvals rose 7.2% in June to 18,328. Private-sector houses rose 0.4%, while private-sector dwellings excluding houses increased 17.8% for the month. The value of total residential building approved rose 15.1% to $11.75 billion.

But approvals are a pipeline measure, not completed supply. The industry still has to finance, commence and complete those projects. That distinction matters because Australia's housing shortage cannot be fixed by a single month of stronger approvals. The medium-term pressure will depend on whether approvals translate into actual construction at a pace that keeps up with population growth.

6. Population Growth Is Slowing — But Demand Has Not Disappeared

Australia's population growth is moderating from its extraordinary post-pandemic pace. ABS recorded net overseas migration of 306,000 in 2024–25, down from 429,000 a year earlier and well below the 538,000 financial-year record in 2022–23.

Even after that decline, migration is still adding hundreds of thousands of people to the population and therefore remains a major source of housing demand.

The implication is subtle. Slower migration should eventually reduce some of the pressure on rental demand and housing construction, but it does not eliminate demand. The market is moving from an exceptional demand shock toward a more normalised—yet still substantial—population-growth environment.

7. What Are the Forecasts Saying?

Forecasts are becoming more cautious, but they do not point to one uniform national outcome. Domain's FY2027 Forecast Report describes a market split by affordability, investor exposure, supply and property type. Its published outlook has Sydney and Melbourne declining over the following year, while Brisbane, Adelaide and Perth remain comparatively stronger.

Domain's forecast ranges are forecasts, not official government statistics. They should be treated as scenarios rather than guarantees.

8. What This Means for Buyers and Investors

9. The Indicators to Watch Through the Rest of 2026

• RBA cash-rate decisions and the language around inflation.
• Monthly CPI and wage data, especially whether inflation is moving sustainably lower.
• Housing loan commitments and the direction of investor lending.
• Cotality and other transaction-based housing-value measures rather than asking prices alone.
• Building approvals, commencements and completions—not approvals in isolation.
• Net overseas migration and population growth.
• Rental vacancy and rent growth, particularly in Brisbane and other high-demand markets.
• Listings, days on market and vendor discounting, which can reveal changes in buyer and seller behaviour before prices fully respond.

Final Thoughts

The Australian property market has reached a more challenging point in the cycle. Prices are falling in several major markets, borrowing conditions remain restrictive and the RBA is not yet signalling an easy path back to lower rates. At the same time, population growth remains positive, housing construction is still struggling to keep pace with underlying demand, and employment remains relatively resilient.

That combination argues against both extremes: neither "property prices can only go up" nor "the market is about to collapse" is supported by the current evidence. The more credible story is a period of adjustment in which quality, affordability and location become increasingly important.

For buyers and investors, that can create opportunities—but only for those who do the numbers carefully. The market is becoming less forgiving of average property in average locations, while well-supported markets and quality assets can continue to attract demand even during a correction.