Australia Viewpoint: Housing under pressure as headwinds converge

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Australia Viewpoint: Housing under pressure as headwinds converge

Housing momentum stalls in 2026

The housing market outlook has shifted materially since we published our 2026 outlook

which forecast 6-8% price growth (see Housing in 2026: Rising demand hits the

affordability wall, 23 Jan 2026) and Budget preview of tax changes (see Housing tax

reform: back to the future? 29 Apr 2026). Alongside changes to housing policy, the

outlook for mortgages rates has shifted higher, while the ongoing Middle East conflict

has heightened uncertainty and added to construction cost pressures.

National house prices are expected to remain broadly unchanged over 2026, as

8% price declines in Sydney and Melbourne are offset by slowing growth in

Perth (12%), Brisbane (9%) and Adelaide (8%). Our revised 2026 forecast implies a

broad-based slowdown in the coming months, given national dwelling prices have risen

2% YTD (Exhibit 2), with falls in Sydney (-2%) and Melbourne (-3%) offset by solid gains

in Perth (10%), Brisbane (7%) and Adelaide (5%).

The slowdown over 2H26 reflects the impact of higher mortgage rates lifting borrowing

costs, reducing lending capacity and weighing on buyer demand. Restrictions on

negative gearing for established housing and replacing the CGT discount with indexation

alongside a 30% minimum tax rate also weigh on prices through reduced investor

demand. Negative sentiment effects associated with tax policy and a weakening

economy should amplify the drag, with homebuyer sentiment dropping sharply in recent

weeks.

However, we do not expect house prices to continue falling through 2027. We expect

housing momentum will turn in early 2027 as the RBA starts considering easing policy

(we expect the 25bps cuts in Aug and Nov 2027), and national prices should rise 2% over