Housing Market Outlook: Slower Growth Ahead, What It Means for You
National home prices jumped about 8.6 per cent through 2025, but forecasts now point to a cooling. The Commonwealth Bank and Westpac both expect growth to slow to roughly +5 per cent in 2026, and further to around +3 per cent in 2027. This reflects rising borrowing costs – the RBA’s February rate hike (to 3.85 %) and another likely in May – which are expected to “cool buyer sentiment” and damp demand. Slower population growth and ongoing housing supply shortages are also at play. Notably, no capital city is forecast to see prices fall in the next two years; low interest and tight supply mean prices should remain positive, if more modestly so.
The late-2025 price run-up was fuelled by tight supply and policy support. For example, the Federal Government’s expanded 5 % deposit guarantee scheme helped first-home buyers enter the market (over 21,000 have used it since October 2025). Even so, affordability is strained: fewer than half of suburbs now lie under the scheme’s price caps. Lenders are mindful of this – and of possible tax changes. Analysts warn that if the capital gains tax discount is cut (from 50 % to around 25 %), it could shave nearly one percentage point off annual price growth by end-2027. In short, higher rates, tighter rules and potential tax changes are expected to slow market momentum.
Growth will be uneven across cities. Brisbane and Perth have been the stars: both saw double-digit increases in 2025. Even here, forecasts are milder for 2026. Westpac now expects Brisbane prices to rise ~7 % next year (down from 14.5 % in 2025) and Perth about 8 % (down from 16.2 %). Meanwhile Sydney and Melbourne face the toughest squeeze. Sydney is forecast to grow around 3 % per year (flat in real terms) and Melbourne ~4 % in 2026 (rising to 6 % in 2027). Both markets have high prices and costly mortgages, making home loans hard to service. Indeed, economists call affordability a “significant headwind” for buyers in those cities.
What Home Buyers and Investors Can Do Now
- Check your borrowing power early. With rates higher and lenders stricter (for example, APRA now limits very high debt-to-income loans), it pays to know exactly what you can afford. We can help you get pre-approval so you lock in a borrowing limit and show sellers you’re ready.
- Review and refinance existing loans. If you own property or have equity, talk to us about refinancing. Securing a lower rate or switching loan types can cut repayments or free cash flow, giving you more flexibility if costs rise.
- Plan for policy changes. Investors should keep an eye on tax settings. If CGT rules change or interest-only lending is tightened, some landlords may sell, which can push up rents. We can advise on structuring your loan (deposit and LVR strategies) to suit changing conditions.
Throughout this slower growth cycle, a smart mortgage strategy is key. At OM Financials, our brokers compare dozens of lenders to find the best loan for you. We make the process simple and guide you every step of the way. Speak with us today to understand your new borrowing power and explore options. You can book a free consultation or call anytime on 0478 876 967.