By Property News Desk
Australia’s property sector has entered 2026 with a surprisingly robust outlook, defying economic headwinds and interest rate uncertainty. According to new research released today, the vast majority of industry professionals expect property values to climb over the next 12 months, though a distinct divide is emerging between the nation’s powerhouse markets and its struggling southern capitals.
The Decoding 2026 report, produced by Cotality, reveals that 87% of surveyed real estate agents and financial professionals anticipate dwelling values will rise this year. This overwhelming optimism follows a strong 2025, where national dwelling values surged 8.6%, adding approximately $71,400 to the median home value. However, beneath the headline figures, the mood is fracturing along state lines as affordability pressures reshape the landscape.
The Multi-Speed Market
While the national sentiment remains bullish—with only 3.5% of respondents anticipating a price fall—the report highlights a significant divergence in local market performance.
Smaller states are currently driving the optimism. Queensland, Western Australia, and South Australia have been identified as the most bullish markets entering 2026. In Queensland specifically, 89% of industry respondents expect prices to rise, with more than half forecasting growth exceeding 5%.
Cotality Australia Research Director Tim Lawless noted that these markets are supported by strong fundamentals. “Strong internal migration, tighter rental markets and a persistent shortage of housing have combined to support all three of these markets,” Lawless said. He added that Western Australia is benefiting from evenly spread demand across various price points, creating steadier growth.
Headwinds for the Heavyweights
In contrast, the outlook for Australia’s two largest markets, New South Wales and Victoria, is far more conditional. While sentiment in NSW remains positive, it is increasingly constrained by stretched serviceability and high dwelling values, making the market highly sensitive to interest rate fluctuations.
Victoria, however, faces the toughest road ahead. After recording the weakest state performance in 2025, confidence in the Victorian market is being dampened by higher property taxes and reduced investor participation.
“Victoria stands out for the scale of investor selling, policy settings and higher holding costs all of which have weighed on activity,” Lawless explained.
Policy Driving Activity
Despite affordability ceilings, government policy is actively stimulating specific market segments. The expansion of the First Home Guarantee has notably lifted activity, with more than 75% of agents reporting increased interest following changes to the scheme. Treasury data indicates over 21,000 first home buyers have accessed the expanded deposit scheme since October.
The Supply Safety Net
Looking ahead, the industry acknowledges that risks are building. Affordability ceilings and inflation uncertainty remain significant hurdles. However, the chronic shortage of housing stock appears to be the ultimate safety net for prices.
“Given we aren’t likely to see a material supply response in 2026 either, this should help to offset any downside risk to home values trending substantially lower,” Lawless concluded.