Much has been said, written and posted over the past few weeks since the Federal Budget announcement on 12 May. Since then, we have endured a barrage of doom and gloom stories from the media, sensationalising everything from the ‘biggest crash in 40 years‘ to ‘350% increases in weekly rents‘ to ‘generational divide‘ stories.
Making sense among the noise, the scare mongering and working out what it means for you: as a first home buyer, home owner, property investor or renter is particularly difficult when there are so many conflicting messages.
What’s Driving The Market Right Now?
In the past, the Australian property market has generally moved in unison, up at the same time, flat and down generally at the same time. However, since COVID, the Australian market has split into seperate sub-markets.
As the nations most expensive market (combined unit and house median value), Sydney has been moving based around affordability limits. As interest rates rose, property prices in Sydney have generally slowed either showing lower growth rates than other markets or at times, falling while others continued to rise.
Melbourne, previously the second most expensive market in Australia, Melbourne has now fallen behind Brisbane, Adelaide, Perth and Canberra to be the 6th most expensive capital and the 8th city when you add in the Gold Coast and Sunshine Coast.
Property prices in Melbourne have been heavily impacted by a state that is facing significant financial strains including; state debt rising from around 20 billion (in 2020) to ~150 billion in 2026 and expected to grow to 200 billion by 2030, significant migration out of the state (mostly to South East Queensland) and significant changes to policies particularly those impacting property tax, auctions and significant reforms to rental laws.
When you add in the current issues impacting the property market (discussed below) including the Iran war, interest rate rises, inflation/cost of living, rising unemployment and, the property and trust tax changes announced in the Federal Budget; we don’t see Victorias problems going away for some time to come.
Brisbane, Perth and Adelaide have seen sustained growth in property prices over the last 6 years, leading the nation for price growth and now ranked as the 2nd, 3rd and 4th most expensive capitals in Australia based on the combined median unit and house values (Cotality: May 2026). These price changes have largely been driven by net positive interstate and overseas migration into these states, new property construction failing to keep up with demand and significant state and federal investment in infrastructure projects, in Brisbane’s case, further fuelled by development ahead of the Brisbane 2032 Olympic Games.
| Capital City | 2020 Median Value (April) | 2026 Median Value (May) | Change |
|---|---|---|---|
| Sydney | $889,992 | $1,282,020 | $392,028 (44%) |
| Brisbane | $507,982 | $1,126,149 | $618,167 (122%) |
| Perth | $448,355 | $1,050,354 | $601,999 (134%) |
| Adelaide | $439,397 | $950,703 | $511,306 (116%) |
| Canberra | $626,997 | $890,555 | $263,558 (42%) |
| Melbourne | $695,761 | $812,621 | $116,860 (17%) |
| Hobart | $484,645 | $752,398 | $267,753 (55%) |
| Darwin | $402,255 | $634,368 | $232,113 (58%) |
| Average | $561,923 | $937,396 | $375,473 (67%) |
Short-Term Headwinds
The following factors are the main issues negatively impacting property prices in Australia over the short-term through the remainder of 2026 and into early 2027.
Iran War
International unrest, and the flow on effects to global economies have impacted local markets including property. The flow on effects for property include: a reduction in consumer confidence, higher cost of living, higher interest rates (both impacting borrowing capacity) and, higher materials costs for new housing.
Interest Rates
The Reserve Bank of Australia (RBA) set the wholesale interest rate and use this setting as a blunt force implement to control inflation. Higher interest rates have two main impacts in the economy; increasing the cost of money which for households means less disposable income to spend on consumer goods and, a reduction in business investment.
Increasing interest rates is an imperfect tool to curb inflation as it only impacts people who have borrowed money. For many, they might have little to no borrowings and possibly savings held in cash deposits so higher interest rates will increase their income and hence stimulate spending.
The current (wholesale) interest rate is 4.35%, following three 0.25% increases in 2026.
Typically, a higher interest rate will deliver lower property prices however, as we have seen over the past few years and following 13 rate rises through 2022-24, property prices rose at record levels, driven by factors other than interest rates.
Inflation (cost of living)
Inflation is the rate of price rises for goods and services that households, business and government purchase. In the case of the RBA and interest rates, its Consumer Inflation that is monitored by the bank and which drives monetary policy (setting of interest rates).
The RBA’s target range is 2-3% per annum, the current inflation rate sits at 4.2%, well above the RBAs target.
Unemployment
Unemployment is a measure of the number of people who are without a job, who are available to work and are actively seeking employment.
In 2020, the unemployment rate reached a high of 7.4% and a low of 3.2% in 2024. An unemployment rate of between 4-5% is considered to be a balanced level of unemployment.
Unemployment currently sits at 4.5%, rising from its most recent low of 4.1% in January.
In terms of property price impacts, a higher unemployment rate has a negative impact on property prices as less people have jobs to fund the purchase of a property to live in, or for investment.
2026 Budget
We published a summary of the major changes in the 2026 budget which have an impact on the property market. It’s important to note that the budget announcements have not (at the time of writing) passed through parliament and are likely to undergo some change before being passed into law. For the purposes of this update, we have assumed that all measures will be passed unchanged.
| Change | Who it impacts | What it impacts |
|---|---|---|
| Capital Gains Tax | Everyone | If you invest (property, shares, etc) the new rules will apply to you Those investing to save for a future property purchase (eg, renters and FHB) will see their savings reduced |
| Negative Gearing | Property Investors, Renters, First Home Buyers | These changes do not impact property purchased before 12 May 2026 Negative gearing is still possible under a suitable structure Half of all investment properties are not negatively geared so 50% of current property investors will not be impacted |
| Family (Discretionary) Trusts | Business, Investors, Self-Employed | Many will shift their structure from a trust to a company to benefit from a lower tax rate (25% vs 30%) and to gain from tax credits available when profits are distributed via dividends |
Why This Budget Isn’t Good For Renters And First Home Buyers
What the Government spin doctors aren’t telling you is that this budget will not benefit renters or first home buyers because of three main problems this budget creates:
- Treasury’s own modelling, published in the budget, predicts that 35,000 fewer new homes will be built as a result of these announcements. This is in a market where we know that demand for housing far exceeds supply (see below).
- Many FHB and people renting, trying to save for a home; invest in shares, ETFs and even Crypto to help them accelerate their savings and hence, purchase their new home sooner. The changes in CGT will impact these investments and hence, make it even harder for them to save for a new home.
- For renters there is a double hit as its widely expected that rents will increase by around 10% over the next 12 months, in part as landlords seek to cover the cost of lost negative gearing and in part, as investors exit the market, tightening the supply of rental properties.
Over the past month we have seen investors pull back and hence, a drop in demand particularly in areas that are typically attractive to investors such as inner city apartments below the $1 million mark. We have seen auction clearance rates collapse (not typically as strong in cities outside Sydney and Melbourne). This would appear to many as a good thing as lower competition will typically mean a drop in prices however, this is a pause that will not last as investors will simply change their approach to buying investment properties to allow them to benefit from negative gearing while also increasing rents and seeking higher yielding properties such as commercial and short term let.
Why This Budget Isn’t Bad For Investors
Anyone with an existing investment property that is negatively geared, can continue to benefit from negative gearing while those with positively geared properties (half of all investors) are not impacted by these changes to negative gearing. Post 12 May, anyone who purchases a new build can negatively gear their property and, for investors looking to purchase an established property, they may elect to change their structure to allow them to continue to use negative gearing.
Why This Budget Is Fantastic For Home Buyers
The budget announcement does not include any changes that will have a negative impact on home buyers and instead, this period of less competition and a swing in market power from sellers to buyers, open’s up an opportunity to negotiate a purchase price below the asking price and on more favourable terms.
Anyone looking to purchase a new home should use this window to purchase a new home before competition returns and property prices resume their upwards advance.
Tailwinds
Demand Exceeds Supply
In the budget announcement the Government has allowed negative gearing in an individual’s name to continue when a newly constructed property is purchased. This is claimed to be a stimulus for new housing construction however, as we mentioned earlier, Treasury’s modelling predicts that 35,000 fewer new homes will be built under the new policy.
In the latest forecast from the Federal Budget and the Institute of Public Affairs, net migration into Australia is expected to be 1.22 million people between 2026 and 2030, 55,000 over the previous forecast.
A 5 year target was set to build 1.2 million new homes by 2030. The current estimate is that just 980,000 will be completed by the end of the period, a shortfall of 220,000 (-18%). This is against higher than planned net migration, making this shortfall even worse.
Queensland leads the nation for net interstate migration with approx 20-30,000 people moving from other states, the Southeast (Brisbane, Gold and Sunshine Coast) taking in 80% of these movers. On a net population growth basis, including movements to Queensland from overseas, 98,000 people moved into Queensland (to June 2025), the Southeast absorbing approx 1,200-1,400 net new residents per week.
With around 2.5 people on average living in a household in Queensland, that equates to demand for housing of 32,000 new homes to be built per annum.
Interest Rates
Following three 0.25% interest rate rises in the first half of 2026, market predictions for interest rates going forward have swung from another 1-3 similar rises to now predicting up to 3 rate drops of 0.25% over the next 6-12 months. Driven largely by the Federal Budget, a slowing of economic growth domestically which is now running at a very low 0.3% in Q1 2026, and an increase in unemployment.
Improving Yields
In 2023, average gross yields in Brisbane were 3.7% for houses and 5.2% for apartments. With property prices rising faster than rents over the past few years, in the most recent report by Cotality for May 2026, gross yields have dropped to 3.1% for houses and 3.9% for apartments. We have seen similar falls for short-term let yields alongside increases in vacancy rates.
With expectations for property price growth to slow and weekly rents to rise at an accelerated rate following the Federal Budget announcement, we expect yields to improve for both long and short-term rentals, making property investment a more attractive option for investors looking for higher yields.
We also expect to see a shift towards higher yielding properties like short-term let and commercial property and away from the previously popular middle market, long-term rental apartment.
Construction, Infrastructure And The 2032 Olympics
According to the Queensland Productivity Commission, the state is experiencing a historic construction boom with the pipeline projected to hit $78 billion, driven by population growth, energy transition and, the Brisbane 2032 Olympics. Despite elevated demand for construction resources, the industry faces severe labor shortfalls and rising costs, alongside major regulatory reforms aimed at boosting productivity.
A report by the Queensland Major Contractors Association provides a forecast for major construction projects in Queensland out to 2030. Over $78 billion of work is currently funded for a range of major construction projects across the state including in the health sector, water and energy infrastructure, transport, resources and heavy industry and to support the Olympics.
The most intense period will peak in 2029/30, around three times the activity in 2025 (based on funding committed). The period from 2026 to 2029 is higher than the last peak period between 2013 and 2016 and will be sustained for several more years than the previous peak. These developments, coupled with increasing competition for skills and resources from other states, will put sustained pressure on costs, industry capability, and capacity.
Prices Continue to Rise
Despite the Iran war, recent interest rate rises, increases in inflation and unemployment and, the Federal Budget announcements, property prices in Queensland, specifically Brisbane, the Gold and Sunshine Coast, continue to rise; not as rapidly however, at an above average rate.
Over the 6 months between the increase in the First Home Buyers 5% deposit scheme on 1 October 2025 and March 2026, we saw property prices in Brisbane rise by between 1.5 and 2% per month.
The Iran war started at the end of February and despite the uncertainty and rapid increase in fuel prices and the flow on effect to goods and services, Brisbane saw property prices increases of 1.8% (March), 1.2% (April) and 0.9% (May).
These monthly increases translate into a quarterly increase (to end of May) of 3.4% and annual increase of 19.1%pa.
Property Price Outlook
The bit you’ve been waiting for, the proverbial $64 million question!
Major Bank (and others) Forecasts
| Forecaster | 2026 | 2027 |
|---|---|---|
| ANZ | 9.7% | 1.4% |
| CBA | 12% | 4% |
| KPMG | 9.4% | 7% |
| WBC | 9% | 3% |
| Average | 10% | 3.9% |
Our View
Year to date, property prices have risen in Brisbane by 6.9% (Cotality HVI June 2026) against the full year forecast of 10% (above). On the ground we are seeing listings significantly down, open home attendance falling and time on market growing.
We see a period of low growth and possibly some monthly falls for the next 3-6 months followed by a return to a more normal rate of growth from Spring/Summer 2026. Through 2027 we go against the average forecasts above of 4% and see a period of increased price growth returning in 2027, along similar lines to 2026 at around 7-10%.
The latter part of 2026 driven by possible interest rate drops, some (but not total) stabilisation in the middle east and the return of investor demand, although not as strong as it has been the past 6 months, and 6 years.
Shift In Market Power
For most of the past 5 years, sellers have held the dominant position in the market. Property prices have risen rapidly, asking prices have typically not been published creating uncertainty for buyers, todays asking price has been higher than the selling price of the same property yesterday, contract conditions acceptable to sellers have been heavily in their favour, demand and multi-offers have been rampant, competition has been high to extreme and, buyers have been playing hunger games trying to get in the market driven by desperation, fear and FOMO.
Welcome back to 2020, a buyers market, at least for now!
With market activity slowing, uncertainty and lower demand, the market has shifted to a buyers market which feels very much like it did on 2020. However, we see this as a short lived window of opportunity for buyers before confidence returns and with it an increase in competition. Not as high as it has been the past 6 years, not as extreme as it was the last 6 months, however swinging back towards a more level playing field. With competition comes increases in property prices and a shift back away from buyers holding the advantage in negotiations.
Legendary investor Warren Buffet is famously quoted as saying:
“Be fearful when others are greedy, and greedy when others are fearful.”
During COVID, property prices fell an average of 2.1% nationally while in Brisbane, after small falls in the first few months to April, property prices entered a sustained period of strong growth. In April 2020, the median dwelling value in Brisbane (houses and apartments combined) was $508,386 (Source: Cotality) and in May 2026, the median dwelling value in Brisbane is now $1,126,149 (in April 2026 it was $1,116.180, a $10,000 increase in just 1 month!).
Buyers who purchased in 2020, 21 and 22, taking a long view on property values, have done exceptionally well.
We see the current market as an opportunity to purchase high quality property during this period, under the right structure, to capitalise on the next growth phase driven by market fundamentals including a shortage of supply, excess demand, increasing construction costs and, with an eye towards the 2032 Olympics.
But My Neighbours Uncle’s Cousin Says The Market Is Going To Crash!
No one knows what the market is going to do, no one has a crystal ball however, being in the property market for 36 years, I’ve heard this one rolled out every year since I first started working in property lending with the ANZ Bank back in 1990.
I’m going to put it out there and say its never crashed. Not in the late 1980,s and 90’s. Not during the GFC or even when COVID arrived. According to Wikipedia a market crash is defined as a fall in values by over 10%. Thats inline with my definition.
And who cares anyway!
You aren’t buying your new home, first home or investment property to hold it for a few weeks, months or even a few years! Its not a share you’re looking to make a quick profit on or, a punt on the pokies at a casino. The average time period of property ownership in Brisbane is around 9 years.
Morgan Stanley (an investment bank) published some analysis which predicted national property price falls of between 5 and 10% in 2026. Of course the media has had a feeding frenzy with headlines focussing on the extreme of a 10% fall in values. Sensationalism, doom and gloom gets attention. Imagine the headline “Falls possible but no big deal”!
Don’t Make The Mistake Of Making Long Term Decisions Based On Short Term Factors
Over the next few months, average prices may fall a few percent in some areas and, in some parts of the market. They may even fall around the 5-10% range that Morgan Stanley has modelled (nationally). However, trying to pick the bottom of the market to “bag a bargain” could well be a very poor strategy because it’s just as likely that in South East Queensland, property prices may in fact keep going up as they have in March, April and May by a total of 3.4%.
On an average apartment, since the end of February we have seen a rise in values of $40,000 and for houses, a rise of $56,000. Those who chose to wait the past three months, will pay more for a new property today compared to a few months ago.
Those who acted confidently during COVID, focussed on the big picture, have seen property values double between 2020 and today. A drop of 5% this month would simply see prices 1.5% net lower than they were in March.
What we are seeing in the market today are opportunities to negotiate with sellers to purchase property below asking prices and on more favourable terms. Less competition and motivated sellers are creating a window of opportunity to secure good quality property at a great price however, that window will not remain open forever.
Your neighbours, uncle’s cousin isn’t the one who will pay more by waiting a few months, or end up missing out on that perfect property.
What Would A Drop In Values Mean
Since the start of 2024, house property prices in Brisbane have risen by 40% and for apartments, values have increased by 56%.
A drop in values of 5% would take prices back to the level they were in January 2026 while a 10% drop would leave prices back at around August last year.
If the predictions of prices rises through to the end of 2026 and into 2027 prove to be correct, waiting for a ‘crash’ comes with the risk of paying more in 3, 6 or 12 months time.
