Confidence in the Australian housing market remains strong entering 2026, despite moods splitting across state lines on aspects like affordability and interest rates.
According to Cotality’s Decoding 2026 report, which gathered responses from real estate agents and financial professionals across property finance sectors, found 87% of respondents expect dwelling value to rise over the next year, while only 3.5% anticipate a fall in prices.
Almost half expect growth above 5%, highlighting the continued market optimism after widespread price gains through 2025.
Cotality’s Home Value Index showed housing values increased in every capital city and regional market last year.
In 2025, national dwelling values rose 8.6% and added around A$71,400 to the median value.
Cotality Australia research director Tim Lawless said while housing conditions were strong in 2025, momentum slowed at the end of the year as affordability pressures intensified and interest rate expectations shifted.
“Housing conditions were strong through most of 2025, which explains the broadly positive sentiment,” he said.
“However, national averages distort the variation of performances and market conditions at a local level, and it’s those differences that are becoming more important as affordability and policy settings diverge.”
The most confident states entering 2026 include Queensland, Western Australia and South Australia.
In Queensland, 89% of respondents expected prices to rise, with more than half predicting growth above 5%.
Respondents had similar expectations for Western Australia, with evenly spread demand across various price points that have helped to support steadier growth.
The optimistic outlook for South Australia is likely driven by its relative affordability and limited supply.
Lawless also suggests that strong internal migration, tighter rental markets and a persistent shortage of housing supported all three markets.
“Those fundamentals remain largely intact but it’s not surprising to see Queensland and Western Australia agents optimistic about price growth in 2026 given their respective fundamentals and economic prospects,” he said.
Sentiment in New South Wales remains positive, but this is increasingly conditional due to the high dwelling values and stretched serviceability.
Victoria continues to lag after recording the weakest state performance in 2025. While most respondents still expect price growth, confidence is influenced by higher property taxes, reduced investor participation and softer population flows.
“Victoria stands out for the scale of investor selling, policy settings and higher holding costs, all of which have weighed on activity, even as first home buyers now account for a larger share of lending,” Lawless said.
More than 75% of real estate agents reported increased activity following the expansion of the First Home Guarantee, with competition intensifying around scheme price thresholds.
