Analysts who were previously in agreement about the continued growth of the country’s real estate market have now become divided, as rising economic uncertainty casts a shadow over future expectations.
Several experts, including the four major banks, have revised their forecasts, pointing to a potential slowdown in growth during 2026 and 2027. Meanwhile, another group expects a decline in property prices, particularly in the major cities.
SQM Research has lowered its forecasts for the housing market in 2026, confirming that the cities of Sydney and Melbourne—two of the most prominent real estate markets in Australia—are now experiencing a noticeable downturn.
This dramatic shift represents a sharp reversal from the company’s previous optimistic outlook and paints a more pessimistic picture for the eastern capitals. The change is attributed to the overlapping impact of several factors, including the ongoing energy sector crises, accelerating inflation once again, and the strong possibility of interest rate increases by the Reserve Bank of Australia.
Last December, SQM Research had predicted in its base scenario that national home prices would record healthy growth ranging between 6% and 10% by 2026. The firm also expected double-digit gains in several Australian capitals, with potential increases ranging between 3% and 6% in Sydney and between 4% and 7% in Melbourne.
However, according to a new scenario based on the assumption that the cash rate will rise to 4.35% by mid-2026 and that annual inflation will peak between 4.4% and 5.0%, the outlook has changed significantly.
The company now expects housing prices in Sydney to decline between 6% and 2%, while Melbourne could see decreases ranging from 4% to 1%. This shift stands in complete contrast to the previous growth expectations, as forecasts for overall property price growth in the capital cities have become far more modest, ranging between 0% and 3%.
