Housing supply crisis will fuel big Australian property price rise – realestate.com.au

The only way is a rise in house prices by 2026, with experts predicting strong growth in all major urban and major regional markets in Australia.

A chronic lack of supply, an increase in borrowing power from recent interest rate cuts and strong migration in recent years have left some parts of the country poised for a boom, with only potential rate hikes appearing to slow price growth.

The December edition of the PropTrack Home Price Index (HPI) showed annual growth of 8.7 percent for all homes through 2025.

And REA Group senior economist Eleanor Creagh said some of the market conditions that have kept growth are still in place and unlikely to change materially over the next 12 months.

“This year’s series of rate cuts, population inflows, investor activity and the extended home guarantee scheme will continue to drive demand, along with revaluation activity,” Creagh said.

“Meanwhile, equities have been quite tight in the market, despite a rise (in November) following the spring sell-off.

“The supply of new homes remains limited so conditions are biased against sellers and I would say that will continue to be the case.

“Overall, it looks like prices will rise further in the summer, although the extended interest rate pause and APRA cap on high debt/income loans are likely to dampen momentum in the first half of 2026 so we could see the growth rate slow somewhat.”

One of the main factors maintaining upward pressure on house prices is the dire state of construction.

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REA Group senior economist Eleanor Creagh.

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The latest housing figures from the Australian Bureau of Statistics show housing approvals were down 6.4 per cent month-on-month in October.

After almost 18 months of the federal government’s housing agreement, which aims to create 1.2 million new homes by mid-2029, we are already more than 20 percent behind.

“Building approvals, which are actually the best-case scenario of what will be built, are well below target,” Creagh said. “That will certainly continue to put a floor under house prices.”

More flourishing than failure

SQM Research released its annual Boom and Bust report in November, predicting that the nation’s home values ​​will rise 6 to 10 percent under a “base case” that sees one or two rate cuts in the second half of 2026, a steady but sluggish economy and inflation between 2.5 and 2.7 percent.

SQM director Louis Christopher said 2025 was “a year of resilience” for real estate, “driven by strong population inflows and the initial easing of monetary policy”.

Mr Christopher noted that 2026 had the potential to be a different landscape.

“The outlook is determined by a range of potential economic paths, from a sluggish economy, through persistent inflation that delays rate cuts, to a global slowdown; or even a robust economic recovery,” he said.

“Perth, Brisbane and Adelaide are all poised for double-digit growth due to their supply constraints and economic momentum.”

Mr Christopher expects Perth and Darwin to lead the growth, by as much as 12 to 16 per cent, while Brisbane and Adelaide (10 to 15 per cent) are also set to rise if there is another rate cut from the RBA.

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SQM Research director Louis Christopher predicts housing growth in 2026.

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Meanwhile, Melbourne and Hobart could grow 4 to 7 percent, while Sydney and Canberra would both rise 3 to 6 percent.

Top picks in the suburbs

Founder of McGrath Estate Agents, John McGrath, made some bold predictions in his list of suburban hotspots for 2026.

The regular feature of his annual McGrath Report names twenty suburbs that he believes have positive potential.

N.S.W

ASHBURY

“This beautiful part of Sydney’s Inner West is starting to increase in value,” McGrath said. “Decent allocation of land. Historic houses. Great cafes on the rise.”

TENNYSON POINT

“This little slice of waterfront paradise is quietly located next to wealthy neighbor Hunters Hill. Take a short drive to explore one of Sydney’s more charming waterfront enclaves.”

Newport Beach, Norah Head and Sans Souci were also seen in NSW.

VIC

NORTHKOT

“Northcote is an urban delight, blessed with lively bars, great restaurants and abundant public and active transport links,” said McGrath.

ESSENDO WEST

“Located just 9km from the Melbourne CBD, and with just under a third of its area set aside as open space, Essendon West is a family-friendly suburb on the rise. Known for its strong community, spacious homes and parks, top schools and excellent transport links.”

Other Victorian suburbs on the list included West Melbourne, Box Hill and Carrisbrook.

QLD

COORPAROO

“With its vibrant village atmosphere, excellent connectivity and proximity to Brisbane’s CBD, Coorparoo continues to demonstrate strong potential for capital growth,” he said. “The mix of characterful Queenslanders and sleek architectural homes attracts families and professionals alike.”

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John McGrath reveals his suburban picks for the year ahead. Photo: Julian Andrews

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REDCLIFFE

“In Brisbane’s highly sought-after Moreton Bay region, Redcliffe offers strong investment potential thanks to the appeal of its coastal lifestyle, ongoing infrastructure upgrades and proximity to the Brisbane CBD.”

Other Queensland suburbs chosen included Clear Island Waters, Peregian Beach and Mackay.

THAT

BATTERY POINT

“Despite its historic charm and waterfront lifestyle, this prestigious suburb is now trading at a discount. Over the year to June 2025, Battery Point’s average house price fell by 1.4 per cent to $1.38 million. Opportunities abound just a stone’s throw from Salamanca Market and Hobart CBD.”

MIDDLE POINT

“With the $47 million Hobart Airport Interchange completed and the $187 million doubling of elevated roads progressing, Midway Point will become one of Hobart’s most connected suburbs.”

Other Tasmanian suburbs on the list included West Launceston, Miandetta and Acton.