Australia’s residential housing market begins the second half of 2026 in a markedly different position from the start of the year. Price growth has continued to lose momentum, with Cotality reporting a 0.4% fall in June - the third consecutive monthly decline in national house prices. Values are now lower than they were at the start of the year in three capital cities of Melbourne, Sydney and Canberra. A buyers’ market has emerged, with auction clearance rates well below 50%, indicating a misalignment on pricing expectations between buyers and sellers. Buyer activity has become more cautious as higher interest rates, reduced borrowing capacity and tax policy uncertainty weigh on purchasing decisions.

TRADING SPACE FOR AFFORDABILITY

Larger, higher-value homes are bearing the brunt of recent price falls in Sydney and Melbourne. A clearer divide is emerging between houses and units, and between the upper and lower ends of the market. In Sydney, values at the top end of the house market have fallen by 5% over the past three months, while lower-quartile units have adjusted by just 0.5%. Melbourne is showing a similar pattern, with lower-end unit prices remaining broadly stable over the same period. Brisbane is also seeing greater resilience at the more affordable end of the market, although unlike Sydney and Melbourne, overall price growth remains positive.

BRISBANE: MOMENTUM MODERATES AFTER A STANDOUT RUN

Brisbane has recorded an exceptional run of price growth over the past five years. In the unit market, price growth now matches Sydney’s increase since 2009, at 92%. The price gap is also narrowing, with less than $15,000 now separating the median sales value of apartments in Sydney and Brisbane, at $898,000 and $885,000 respectively. While Brisbane apartment growth is beginning to ease, the city remains on track to overtake Sydney and become Australia’s second most expensive apartment market within months. The Gold Coast has already moved ahead of Sydney, supported by strong interstate migration, downsizer demand and a wave of prestige apartment development. Brisbane has also benefited from population growth, relative affordability, and first home buyer and investor demand. The 2032 Olympic Games have added further momentum, providing a long-term investment roadmap, supporting infrastructure investment and population growth expectations, and reinforcing confidence in Brisbane's fundamentals.

Following a period of exceptional growth, Brisbane's housing market is showing early signs of transitioning into a more mature phase. As some parts of the market approach Sydney-level pricing, affordability pressures are likely to temper the pace of growth. Domain expects units to continue to outperform houses, forecasting 7% growth over the year to June 2027. However, downside risks remain, particularly if newly legislated tax changes weaken investor demand.

IN THE HEADLINES: DEVELOPERS WARN SUPER BAN COULD WEIGH ON OFF-PLAN SALES MARKET

The Federal Government’s new restrictions on SMSF (self-managed super funds) borrowing for residential property add another headwind for apartment development. Industry estimates suggest SMSF investors have become an important source of pre-sale demand, particularly in larger projects, with some developers citing contributions of up to 30%. By reducing investor participation, the changes could make it harder for projects to meet the pre-sale thresholds needed to secure construction finance. With housing supply still Australia’s central challenge, the reform risks further limiting new development activity.