Housing price growth to slow with higher rates

Australia’s housing market is expected to lose momentum over the next two years, with higher interest rates and subdued consumer confidence weighing on buyer demand.

"The uncertain backdrop and higher rates are likely to soften Australia’s housing market in 2026, so ANZ Research now expects capital city housing prices to lift 2.8% (previously 4.8%)."

Capital city prices are forecast to grow 2.8% in 2026 and 2.1% in 2027, signalling a clear easing in price growth as the property market softens.

ANZ Research expects the slowdown to become more pronounced in Sydney and Melbourne, which are forecast to underperform in 2026. Softer conditions are then expected to broaden in 2027, with Adelaide, Brisbane and Perth likely to lose momentum following an extended period of strong growth.

Since the escalation of the Middle East conflict in late February, ANZ Research has added another 25bp hike to its RBA profile and now expect the cash rate to peak at 4.35% in May.

This would fully reverse the 75bp of cuts seen in 2025 and would leave rates in what ANZ Research views as restrictive territory. Confidence has fallen sharply in recent weeks, with ANZ-Roy Morgan Australian Consumer Confidence near a record low.

The uncertain backdrop and higher rates are likely to soften Australia’s housing market in 2026, so ANZ Research now expects capital city housing prices to lift 2.8% (previously 4.8%) (Figure 1).

Sydney and Melbourne housing prices are below October 2025 levels, and properties in the top quartile of these markets have declined for five consecutive months. These two cities tend to be more rates-sensitive (Figure 4). ANZ Research expects to see the sharpest slowdown in prices in Sydney and Melbourne with small falls in housing prices in 2026.

It also expects Brisbane, Perth, Adelaide and Darwin to slow, but this is likely to be more pronounced in late 2026 and early 2027. Listings are currently very low in these markets (Figure 3), and price growth has remained robust in early 2026. As the year progresses, higher rates, slowing activity and affordability constraints are likely to slow price growth.

ANZ Research expects Adelaide, Brisbane and Perth to underperform in 2027, with widespread falls in housing prices unlikely given the structural tightness of the market. Higher interest rates and building costs are likely to negatively impact supply, while population growth is expected to remain solid.

 Madeline Dunk and Adam Boyton, Economist and Head of Australian Economics at ANZ.

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