What’s ahead for 2026 market – John McGrath

With a new year comes new possibilities and opportunities for the property market. Will the Reserve Bank hand out more interest rate cuts? Will high values continue? Will lagging markets finally enjoy some growth?

While anything is possible in a new year, I expect to see an increase in buyers’ resilience, creativity, and determination to gain a hold on the property market, regardless of continued high values. And, as discussed in the McGrath Report 2026, government reforms and schemes will continue to have a significant impact on our property market, as will construction issues.

But firstly, on the subject of interest rates, we saw three cuts in 2025 which brought the cash rate to 3.6% - the lowest figure since April 2023. While more drops were expected last year, we could still enjoy lower rates by the end of 2026. Also, as global economic and political uncertainty stabilise over the next 12 months, property demand will escalate and prices will rise – but perhaps not until we get another much-awaited interest rate cut or two.

Another possibility is that with some underlying economic issues still to be resolved, some sellers may sit on the sidelines for a little while.

Meanwhile, struggling markets such as Melbourne may finally experience some modest growth this year. As I have said previously, Melbourne’s lagging property market makes it a value city.

There’s no doubt that this city has been badly impacted by some recent government decisions. But Melbourne is still one of the great cities of the world, so, it will catch up to the rest of Australia’s major property markets, this year, or even next year. Certainly, if you’re looking for great value, either now, or in the next three or four years, Melbourne’s probably the best place to do this.

Unfortunately, this isn’t the case in Sydney, which is out of reach for many buyers, especially those entering the market for the first time with a median house value of $1,587,709, according to Cotality’s final Home Value Index for 2025. Even so, Sydney apartments can present a good alternative for buyers and so can nearby locations such as the Central Coast and Wollongong. These two areas feature properties that are well under Sydney’s median value, and most importantly, they give buyers a chance to get into the market, even if they have to say with the Bank of Mum and Dad a bit longer.

As for Darwin, Perth and Brisbane, Cotality’s December HVI reported these markets’ dwelling values increased between 18.3% and 26.9% across the year. In Adelaide, values rose 12.7%. This brings me to a very important point, which a lot of people are asking: will values keep rising, and if so, for how long?

I believe high double-digit increases, year in and year out, can’t continue forever, because you’re either going to see a problem, or the market will need a breather.

In the meantime, I don’t think buyers will get priced out of the market. They’ll just have to be more resourceful and look at different options. For example, they might have to live at home for a few years more, or get a flat mate to help pay the mortgage.

Such options, and others, might not be as hard as people think. After all, property purchasers are already pretty creative and resilient. They’ll find a way to buy, whether it’s obtaining a city apartment, or finding a house outside of a metropolitan area.

Finally, in some good news for property investors, although not tenants, the rental market should experience a positive year again in 2026. Rents are likely to increase by another 5% or more in most metropolitan markets, as the housing shortage continues to keep demand higher than supply.

Also, as new developments start to come of out the ground, this will alleviate the situation in 2027 as well. This is on the back of construction cost increases finally beginning to moderate last year.

Cotality’s latest Quarterly Rental Review also showed low property supply was continuing to drive rental value growth. National rental listings were about 11% lower than a year ago through the December quarter and 17% down on the previous five-year average. And, annual rental growth increased 5.2%, up from 4.8% in 2024.

If you’re thinking of buying, selling or investing in 2026, check out my top suburb ideas and property thoughts in the McGrath Report 2026.