Australian Home Values Expected to Climb in 2026

Home prices are forecast to rise by up to 13% by the end of 2026, pushing the cost of owning a property to 8.4 times the average Australian household income. Although lower interest rates may provide some relief for current homeowners, they could also worsen the divide between property owners and those who are yet to buy.

Australia’s housing market is gaining momentum again. Expected interest rate cuts and a limited supply of new homes are encouraging more people, especially first-home buyers, to enter the market. However, prices have already risen by 40% over the past five years while wages are only expected to grow by around 3% in 2026, according to the central bank.

Recent data shows the median home value reached $812,602 in late 2024, equal to 7.9 times the typical household income of $1975 per week. By 2025, this ratio could climb to a record 8.4. In Greater Sydney, housing is even less affordable. Home values there are projected to hit 10.3 times the regional average income, up from 9.7 in 2024.

At the same time, existing homeowners could benefit from improved conditions. If interest rates are cut more than once as expected, the cash rate could drop to around 2.85% by May 2026. This may lower the average monthly mortgage repayment by about $165. Still, research shows many borrowers choose to maintain their repayments at current levels, allowing them to pay off their loans faster.

The bigger concern is that growing property prices are deepening wealth inequality. Those who already own homes gain from capital growth and better refinancing options, while new buyers are often forced to settle for less desirable locations or smaller properties just to enter the market. Buyer agents report record activity from both first-home buyers and an increasing number of “rentvestors,” who purchase homes to rent out while continuing to rent where they live.

Housing affordability still varies significantly between regions. Value-to-income ratios range from 3.7 in the Northern Territory to over 10 in Sydney. The decisions made in the coming year are likely to influence who advances and who is left behind in Australia’s housing landscape.

Source: Australian Financial Review, Broker News, Property Update

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