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Investors to expect uneven growth in 2026
With property values increasing at their fastest pace in four years, investors have been urged to temper their expectations and prepare for more modest growth in 2026, according to the latest data.
According to Cotality’s latest Home Value Index, property values grew by just 0.7 per cent nationally in December, recording the lowest level in the last five months.
The index found that, with values in Sydney and Melbourne falling by 0.1 per cent, the two capitals recorded the first month-on-month decline since January last year, before the first of 2025’s three rate cuts.
Additionally, the index said that while most major capitals saw an increase in value, they had begun to slow and lose momentum.
Despite a soft end to the year, home values rose by 8.6 per cent in 2025, the strongest calendar year since 2021.
Cotality research director Tim Lawless said the softening market would result in a weaker start for property growth in the early stages of 2026.
“Renewed speculation that the rate-cutting cycle is over and the next move from the Reserve Bank of Australia (RBA) could be a hike has dented housing confidence,” Lawless said.
“A ‘higher for longer’ setting on interest rates, alongside a resurgence in cost-of-living pressures and worsening affordability pressures, looks to have taken some heat out of the market.”
Across the country, Darwin led in price growth in 2025, with properties increasing by 18.9 per cent over the year, followed by Perth and Brisbane, which increased by 15.9 and 14.5 per cent, respectively.
Melbourne experienced the lowest growth among the capitals, with prices rising by 4.8 per cent, while values in Sydney rose by 5.8 per cent over the calendar year.
Regional dwelling values continued to outpace those of their metropolitan counterparts, growing by an average of 9.7 per cent compared to 8.2 per cent annually.
Regional Western Australia (WA) led the way, with home values rising by 16.1 per cent over 2025, followed by Queensland, which grew by 12.6 per cent, while the lowest growth was in Victoria, where values rose by 6 per cent.
Lawless said a range of factors, such as inflation, interest rates, and affordability, would likely make home value growth in 2026 more modest and uneven than in 2025.
“The balance between inflationary pressures, RBA policy decisions, and ongoing supply shortages will be critical,” he said.
“While downside risks are more pronounced, structural undersupply and targeted stimulus should help stave off a material correction, leaving the market resilient in many areas despite the headwinds.”
Rental outlook
The index found that rents rose by 5.2 per cent in 2025, marking a minor increase from the 4.8 per cent growth of 2024, led by a 10.1 per cent rise in regional WA.
Despite an increase in vacancy rates from 1.5 to 1.6 per cent in December, Lawless said vacancies remained near record lows and could reflect seasonal trends rather than a shift in rental conditions.
“Rental conditions tend to be highly seasonal through December and January, with leasing cycles disrupted by university breaks and the festive season.”
“We will get a better feel for rental conditions in February. However, even if conditions have loosened a little, it's from an extremely tight position, and rents are likely to rise further through 2026,” Lawless concluded.