Australian House Prices Tipped to Rise 7.7% in 2026: What KPMG's Forecast Means for Every Capital City
Australia’s Property Market in 2026: Rising Despite Rates
After months of speculation about whether higher interest rates would finally tip Australian property prices into meaningful decline, the consensus from major forecasters has shifted. KPMG’s January 2026 Residential Property Outlook forecast national house prices to rise 7.7% across the year, with units expected to gain 7.1%. The projection was released when the cash rate was at 3.85%, and even with the RBA’s subsequent increase to 4.10% in February, the broad direction of the forecast holds.
The reasons are structural rather than cyclical. Australia is not building enough homes to house a growing population. Builders are facing cost pressures that make new construction economically unviable at many price points. Immigration continues at historically high rates. And while borrowing capacity has been compressed by rates that were at emergency lows three years ago, many buyers have adjusted their expectations and budgets rather than stepping back from the market altogether.
The result is a market that confounds simple narratives. It’s not booming, it’s not crashing. It’s diverging, city by city, suburb by suburb, and property type by property type, in ways that require a much more nuanced read than the national headline.
What KPMG’s Forecast Means in Practice
KPMG’s 7.7% national house price forecast represents median values. For individual buyers or investors, the outcome will vary significantly depending on location and property type.
The forecast is underpinned by three key assumptions:
- No further RBA rate increases after Q1 2026 (this assumption is now under some pressure given the February hike to 4.10%)
- Population growth continuing at or above 1.5% annually
- New housing supply remaining constrained through at least mid-2026
At 7.7% on a national median house price of approximately $1.06 million (CoreLogic, March 2026), that represents an average gain of roughly $81,600. But that average masks the spread from Perth, where KPMG expects gains in the 10–12% range, to parts of Melbourne’s inner suburbs where growth may be flat or marginally negative.
Key Forecasts by Metric
| Metric | KPMG Forecast (2026) |
|---|---|
| National house price growth | 7.7% |
| National unit price growth | 7.1% |
| National median house price (Mar 2026) | ~$1.06 million |
| Implied median price end 2026 | ~$1.14 million |
| Key outperformers | Perth, Brisbane, Adelaide |
| Key underperformers | Inner Sydney, Hobart |
Source: KPMG Residential Property Outlook (January 2026), CoreLogic (March 2026)
City-by-City Breakdown
Perth: The Standout Market
Perth has been the most consistently discussed Australian market for the past two years, and 2026 is shaping up as more of the same. The city entered the current rate cycle from a position of relative affordability, with median house prices significantly below Sydney and Melbourne. Strong in-migration from the east coast and overseas, combined with a resources sector providing stable employment, has kept demand well ahead of supply.
SQM Research data shows Perth’s vacancy rate at 0.6% in early 2026, the lowest of any major capital city and one of the lowest recorded in the city’s history. With so few properties available to rent, would-be long-term renters are increasingly choosing to buy, adding to purchase demand even at higher rate levels.
PropTrack data for Q1 2026 showed Perth house prices up 3.1% for the quarter alone. Extrapolated, that pace implies annual growth well above KPMG’s national 7.7% forecast for Perth specifically. Many local analysts believe 10–12% for the full year is achievable if supply does not improve meaningfully.
| Perth Property Indicators (Q1 2026) | |
|---|---|
| Median house price | $780,000 |
| Quarterly growth | 3.1% |
| Rental vacancy rate | 0.6% |
| Median rent (houses, per week) | $680 |
| Gross rental yield | ~4.5% |
Source: PropTrack, SQM Research (March 2026)
Brisbane: Running Hot, But Signs of Moderation
Brisbane was Australia’s best-performing major capital city in 2023 and 2024, and it retains strong fundamentals heading into 2026. Population growth driven by interstate migration from Sydney and Melbourne continues, the Olympic infrastructure pipeline is creating jobs, and the city’s relative affordability compared to Sydney means more buyers can qualify for mortgages at current rates.
That said, Brisbane is no longer cheap. The city’s median house price has crossed $900,000 in several inner-ring suburbs, and affordability pressures are beginning to slow the pace of growth. Q1 2026 PropTrack data showed quarterly growth of 2.4%, strong but below Perth’s pace.
KPMG forecasts Brisbane full-year growth in the 9–11% range, reflecting strong underlying demand tempered by some affordability fatigue in premium suburbs.
Adelaide: Quietly Consistent
Adelaide often flies under the radar in national property commentary, but it has delivered above-average returns for three consecutive years. The city’s affordability relative to Sydney and Melbourne, combined with strong public sector employment and growing life sciences and defence industries, supports steady demand.
Median house prices in Adelaide crossed $750,000 in early 2026 for the first time. Vacancy rates remain tight at around 0.9%. KPMG’s forecast for Adelaide sits around the 7–9% range.
Sydney: Diverging Within Itself
Sydney is the most complex of Australia’s major markets. At the headline level, KPMG expects moderate growth of 5–7% for 2026. But the story within that is highly variable.
The premium inner suburbs (Inner West, Eastern Suburbs, Lower North Shore) have shown price softness in early 2026 as affordability constraints bite hardest. Median house prices in some of these areas exceed $3 million, meaning buyers face mortgage repayments of $15,000 to $20,000 per month on standard variable rates.
Outer ring suburbs and outer western Sydney tell a different story. Here, buyers with smaller budgets are finding that prices have become somewhat more accessible, and competition remains firm.
| Sydney Median House Prices (Selected Suburbs, Q1 2026) | |
|---|---|
| Mosman | $4.2 million |
| Balmain | $2.8 million |
| Parramatta | $1.4 million |
| Penrith | $950,000 |
| Liverpool | $820,000 |
Source: PropTrack (Q1 2026), approximate figures
The inner-ring softness may present opportunities for buyers with longer time horizons, though at current mortgage rates the holding cost is substantial.
Melbourne: Listings Rising, Growth Muted
Melbourne has seen a notable increase in listings in 2026, with CoreLogic reporting listing volumes up 14% year-on-year as of March 2026. This is partly a reflection of investor selling (higher rates and state government land tax changes have increased holding costs) and partly a function of upgraders and downsizers taking advantage of market stability to transact.
More supply equals less price pressure, and KPMG’s forecast for Melbourne is toward the lower end of the national range at 4–6%. Some inner-suburb unit markets may see flat or marginally negative outcomes.
The rental market in Melbourne remains tight (vacancy rate around 1.4%), which continues to support investor interest despite pressure on cash flow from higher rates and land tax.
The Supply Problem: The Engine Under All Forecasts
Every major forecaster’s bullish outlook for Australian property in 2026 rests on one foundational assumption: supply will not catch up with demand anytime soon.
The data supports that view. ABS building approvals data for December 2025 showed total dwelling approvals at their lowest monthly figure since 2012. High construction costs (up approximately 25–30% since 2019 according to CoreLogic’s Construction Cost Index) mean many projects that were feasible at 2021 cost levels are no longer viable at current prices, particularly at the entry-level price points where most buyers are shopping.
The government’s target of 1.2 million new homes by 2029 under the National Housing Accord appears increasingly unlikely to be met. Master Builders Australia estimated in late 2025 that the industry was tracking at roughly 60–65% of the required pace. Even with state government incentive programs and accelerated planning approvals in some jurisdictions, the pipeline shortfall is significant.
This structural imbalance is what gives forecasters like KPMG confidence that even at a 4.10% cash rate, prices will continue rising in most markets.
What This Means for Buyers
Borrowing Capacity Has Tightened Significantly
For a borrower with a $150,000 household income, the maximum loan available in April 2026 on a standard variable rate of around 6.5% is roughly $750,000 to $800,000, depending on the lender and serviceability buffer. At the same income in early 2022 (when the cash rate was 0.10%), that same buyer could access approximately $1.2 million to $1.4 million.
That compression is the core tension in the market: prices are forecast to rise, but the buying power to meet those prices has shrunk. The result is buyers moving to outer suburbs, apartment segments, or markets like Perth and Adelaide where value still exists relative to Sydney.
First Home Buyers Facing Competing Pressures
First home buyers are caught between wanting to enter the market before prices rise further, and the reality that larger deposits are required at higher prices, and monthly repayments are harder to service.
The federal government’s Help to Buy scheme (shared equity) and various state First Home Buyer grants offer some assistance, but these are means-tested and capped in ways that exclude many buyers in Sydney and Melbourne.
Investors Recalibrating
Property investors are recalibrating strategies in 2026. In markets with strong rental yields (Perth at 4.5%, Adelaide at 4.2%), the numbers can stack up even at higher rates. In Sydney, where gross yields on houses average around 2.5–3.0%, the equation is harder, and many investors are looking at units or interstate options.
Negative gearing remains available (the Labor government’s Capital Gains Tax discount reform proposals have not passed as at April 2026), which continues to support investment in certain price ranges.
The Rate Outlook: The Key Variable
The KPMG forecast assumed no further rate increases after Q1 2026. The RBA’s February 2026 hike to 4.10% was the first since the series of cuts in 2025. SQM Research has flagged the possibility of another increase in May 2026, which would put further pressure on borrowing capacity and potentially soften the growth trajectory.
Most economists surveyed by the major banks expect the cash rate to remain at 4.10% through mid-2026, with possible cuts in the second half of 2026 if inflation data improves. The RBA’s next scheduled decision is in May, and the quarterly CPI data released in late April will be closely watched.
A cut back to 3.85% in the second half of 2026 would restore borrowing capacity for many buyers and likely accelerate growth, particularly in Sydney and Melbourne.
Working With a Property Professional
Whether you’re buying your first home, adding to an investment portfolio, or looking to sell in 2026, the diverging nature of the current market means broad national forecasts are only a starting point. Getting the most out of the current environment means understanding your specific city’s supply and demand dynamics, knowing how to structure your financing to maximise flexibility, and having professional advice on tax implications (negative gearing, CGT, land tax) that are increasingly complex in a multi-state investment environment.
Looking for property and finance professionals to help you navigate the 2026 market? WealthWorks connects you with verified mortgage brokers, property investment advisers, and accountants who specialise in complex property structures. Find a specialist near you.
Frequently Asked Questions
What is KPMG's forecast for Australian house prices in 2026?
KPMG's January 2026 Residential Property Outlook forecasts national house prices to rise by 7.7% across 2026, with unit prices expected to increase by 7.1%. The forecast is driven by chronic undersupply, strong population growth, and resilient demand particularly in Perth and Brisbane. KPMG notes the trajectory could change if the RBA raises rates further, which remains a risk given inflation is still above the 2–3% target band.
Which Australian cities are expected to have the strongest property price growth in 2026?
Perth and Brisbane are expected to lead national house price growth in 2026, supported by relatively affordable entry points, strong interstate migration, and tight rental markets. Adelaide is also forecast to perform above average. Sydney and Melbourne are expected to see more moderate growth, with Sydney's higher-end suburbs under pressure from elevated interest rates and affordability constraints. Darwin and Hobart are forecast to see softer conditions.
How does the current Australian cash rate affect property prices in 2026?
The RBA's cash rate is at 4.10% as of April 2026, having been raised from 3.85% in February. Standard variable mortgage rates are now between 6.0% and 7.5% depending on the lender and loan type. These elevated rates reduce borrowing capacity and add to monthly repayment costs, which typically puts downward pressure on prices. However, the persistent shortage of housing supply is counteracting this, sustaining demand particularly in lower-to-mid price brackets where buyers are less sensitive to rate changes.
Is it a good time to buy property in Australia in 2026?
Whether it is a good time to buy in Australia in 2026 depends heavily on your city, budget, and circumstances. In markets like Perth and Brisbane where supply remains tight and population growth is strong, delaying may mean buying at higher prices later. In Sydney and Melbourne, there is more stock available and some softening in premium segments. Regardless of timing, buyers should stress-test repayments at mortgage rates 2–3% higher than current rates, given ongoing RBA uncertainty. Working with a mortgage broker to understand borrowing capacity before committing is strongly recommended.
How does Australia's housing shortage affect property price forecasts for 2026?
Australia's housing shortage is a primary driver of price resilience in 2026. The National Housing Finance and Investment Corporation (NHFIC) has estimated Australia needs 1.2 million new homes by 2029 to meet demand, but building approvals fell to a decade low in late 2025 due to construction cost pressures and labour shortages. The gap between supply and demand is widest in Perth, Brisbane, and Adelaide, which explains why those cities are forecast to outperform. The ABS reported annual population growth of 1.7% in late 2025, adding roughly 450,000 people, each of whom needs somewhere to live.
What Australian property price growth data is available for early 2026?
PropTrack data for Q1 2026 showed national median dwelling values up approximately 1.8% for the quarter, with Perth leading at 3.1% and Brisbane at 2.4%. CoreLogic's monthly data showed annual growth of 6.2% nationally as at March 2026. SQM Research reported national rental vacancy rates at 1.1% in February 2026, the tightest in more than a decade, which continues to support investor demand and underpin purchase prices in key markets.
