Australia’s housing market is gearing up for significant growth, with Sydney and Melbourne leading the way, according to Domain Group’s latest home price forecast report. The report predicts record price levels in Sydney, Melbourne, Brisbane, and Adelaide by the end of the 2025-26 financial year.
Domain expects house prices in Australia’s capital cities to rise by an average of 6% over the next 12 months, with unit prices following slightly behind at 5%. This growth is attributed to factors such as lower interest rates, strong demand, limited supply, and incentives for first-home buyers.
Dr. Nicola Powell, Domain’s Chief of Research and Economics, highlights that Sydney and Melbourne, being the largest real estate markets, will experience the most significant price increases due to factors like lower borrowing costs and targeted support for first-home buyers.
In Sydney, house prices are projected to soar by 7% to $1.83 million by mid-2026, with unit prices expected to reach $889,000. Dr. Powell notes that Sydney’s low unemployment rate and rising incomes will further boost prices in the city.
Meanwhile, Melbourne is anticipated to see house price growth of 6% to reach a record median price of $1.11 million. The city’s unit prices are also expected to rise, albeit remaining 3% below their peak in 2021.
Despite the dominance of Sydney and Melbourne, other capital cities like Brisbane, Adelaide, and Perth are also set to experience growth, albeit at a slower pace. Brisbane’s house prices are forecasted to grow by 5%, Adelaide by 4%, and Perth by 5%.
Canberra, on the other hand, is expected to maintain steady growth but below its peak values. House prices in the city are projected to recover to the lower $1 million range, with units still 15% below recent highs.
Domain’s report emphasizes four key trends shaping Australia’s housing market outlook: interest rates, population momentum, constrained supply, and policy support coupled with income growth. These factors are expected to influence housing demand and affordability across the country.
While migration may be slowing down, demand for housing remains strong, leading to larger households and increased interest in affordable dwellings like units. However, challenges such as labour shortages, planning delays, and higher construction costs continue to hinder supply growth.
Policy initiatives targeting first-home buyers and income growth from slowing inflation and stronger wages are likely to support housing demand. Despite these positive indicators, Domain cautions that the expected price growth may be more moderate compared to previous cycles due to ongoing affordability challenges.
In conclusion, the forecasted growth in Australia’s housing market presents opportunities and challenges for both buyers and sellers across the country’s major cities. With various factors at play, the real estate landscape is set to evolve in the coming months, shaping the future of the property market in Australia.
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