2026 market shifts to test agents’ pricing skills as demand surges

In a rapidly evolving real estate landscape, 2026 is poised to challenge property agents with market shifts spurred by the First Home Guarantee scheme, lower interest rates, and rising incomes. These factors are expected to elevate demand and dwelling values across Australia, emphasising the need for precise pricing strategies among agents.

The year 2025 witnessed the much-anticipated rate cuts, coupled with a surge in investment activity. This momentum is set to continue into the first half of 2026, buoyed by the expanded First Home Guarantee scheme, which is expected to further fuel demand. Nicola Powell, Domain’s chief of economics and research, described 2025 as an “eventful year for property,” with the momentum likely to persist. “We’ve seen a big jump in investment activity, which is a good forward indicator of buyer segments over the next six months,” Powell told REB. “So we know that investors are going to be active in the early part of next year, and then the expansion of the Home Guarantee Scheme is going to bring forward a whole wave of demand to the housing market.”

The Domain Forecast Report 2026 outlines a two-phase growth trajectory for the property market. The initial phase is characterised by strong momentum from first-home buyers, investors, lower rates, and rising incomes. This is expected to be followed by moderated growth in the latter half of the year. Powell noted a significant shift from the trends seen in 2025, predicting property price increases across all capital cities. “This year, we have had Melbourne and Canberra underperforming, but we are predicting that they will fully recover,” she said.

In some areas, units are forecasted to outperform houses due to first-home buyers being priced out, shifting demand towards apartments. “In any case, we’re not forecasting any pullback in price,” Powell added. The evolving market dynamics underscore the importance of accurate property appraisals by agents, as competition intensifies. Powell emphasised that 2026 will not be marked by a boom, nor will it be subdued. Instead, each segment will perform differently, with the potential for rapid changes. “It will be critical for agents to guide sellers, educating their customers, and Australians on what’s happening in those localised dynamics,” she advised. “Agents will need to keep their finger on the pulse in terms of the economy, in terms of what’s driving the market, to help people make better decisions when it comes to buying and selling.”

Sydney remains the nation’s most expensive market, with house prices expected to reach a median of $1.92 million by 2027, while unit prices are projected to rise to $892,000. This growth is supported by affordability constraints and renewed demand from first-home buyers. “We know that Sydney goes through expansion and contraction, which is a sign of a healthy property market, but prices will continue to rise on the trajectory to be 2 million by 2027,” Powell explained. “Rising prices have a domino effect. When a city becomes so grossly unaffordable, young families are leaving, and it pushes that pressure to other capital cities in terms of demand.”

Melbourne is forecasted to fully recover in 2026, with the median house price reaching $1.17 million, driven by improved affordability and renewed buyer confidence. “This year, Melbourne has underperformed relative to other capital cities; it used to be much more expensive than Brisbane, Adelaide and Perth, but they are now rubbing shoulders,” Powell observed. “Melbourne has relative value that’s built up over time, and investors are starting to look back at the city, particularly with the gross profile, likely to come back.” Modest and sustainable price growth is expected, supported by auction clearance rates and Melbourne’s relative value compared to other capitals.

In Brisbane, house prices are anticipated to rise by 5 per cent to a record $1.19 million, with units growing by 7 per cent, maintaining the fastest unit growth nationally. The market is set to benefit from lower interest rates, recovering household incomes, and major infrastructure projects ahead of the 2032 Olympic Games. Meanwhile, Adelaide’s house prices are expected to grow by 4 per cent, reaching $1.11 million, with units slightly higher at 5 per cent growth to $681,000. Powell noted that affordability pressures, following years of double-digit gains, will moderate momentum in Adelaide, while demand for more affordable homes remains firm.

Perth’s house prices are projected to rise by 5 per cent in 2026, surpassing $1 million, supported by lower interest rates, strong income growth, and first-home-buyer support, with units growing slightly faster to $613,000. The Canberra market is also expected to fully recover in 2026, with house prices reaching a median of $1.18 million and unit prices rising to $631,000, driven by improving affordability and steady population growth. Powell concluded that price growth in Canberra will likely remain more subdued than in other capitals due to modest population growth and a well-matched housing supply. “What we’re expecting is modest rates of price growth,” she said. “Canberra won’t be driven by premium or the very affordable markets, but by the middle sector of the market, buyers who are looking to upsize.”

This article was first published in Real Estate Business, a sister-brand of Property Buzz.