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Planning to grow your portfolio in 2026? Think twice
While the past couple of years have been fruitful for investors, a property professional has warned against growing portfolios in 2026, deeming the year not fit for investment.
A property expert has warned that 2026 may be a risky year for real estate investment, urging investors to think twice before buying and exercise overall caution across the industry.
Co-founder of bRight Agent, Aaron Scott, said that despite the property market showing strong growth over the last couple of years, 2026 will not see the same results and might bring financial losses for investors.
“It’s dangerous to think that just because property has been hot over the past few years, that it will continue to be so over the next year or two,” Scott said.
Scott said the property market was already showing signs of slowing, with Cotality data recording a 0.7 per cent rise in December, the smallest in five months, alongside Sydney and Melbourne declining by 0.1 per cent, signalling a soft 2026 start.
“The real estate market is definitely softening – especially from an investment point of view.”
He said the property market slowdown was just one concern, with supply-demand imbalances, uneven price growth, rising interest rates, mortgage stress, and higher selling costs also making Australian real estate a risky investment over the next few years.
According to Scott, while the housing market has grown substantially despite multiple Reserve Bank of Australia (RBA) rate hikes, driven by net migration and affordability pressures, creating an artificial situation that could change quickly depending on government policies.
“From an investment outlook perspective, any artificially generated demand without strong regulation in place is not a good fundamental basis to invest.”
“If net migration was reduced to zero tomorrow, you’d not only get a housing price crash, but most likely an instant economic recession as well.”
In addition to supply being low across the country, Scott said the property market has also been reverting to the mean, with cheaper properties growing while the top end of the market has slowed.
He said that the slower activity in Sydney and Melbourne, alongside strong growth in Perth, Brisbane, and Adelaide, aligned with market mean-reversion expectations.
“Mean reversion is a double-edged sword, and by definition will not continue indefinitely.
“For example, as Perth property values increase, they get less attractive at the same time, and prices will inevitably slow. For this reason, going forward, it would be ludicrous to assume that growth over the next year or two will mirror growth over the past couple of years.”
In addition to rising property prices, Scott said inflation has been pushing Australian households to the limit, with research showing that a quarter of mortgage holders were at risk of stress, while rising costs for insurance, power, and groceries further strain budgets.
“It’s fair to say that real wages are starting to rise, but remember that inflation compounds; so we’ve had 4% on top of 5% on top of 6% on top of 7% and so on, so when you think of it that way, wages still have a long way to go to get back to our pre-COVID-19 norms.”
“If those fundamental reasons weren't enough, high stamp duty, higher-for-longer interest rates, and excessive selling costs are still plaguing the Australian real estate market.”
Scott said that for investors which mortgage have become too much, selling remained an option if they could find reasonable real estate fees.
“Let's face it, unlike selling shares or bonds, selling an investment property can be an extremely costly endeavour.”
He said that while taxes are unavoidable, real estate commission rates typically range from 1.5 to 3 per cent of a property’s final sale price, with metropolitan areas like Sydney and Melbourne leaning toward the lower end and regional areas often higher due to less competition.
Additionally, agents may charge marketing fees for photography, advertising, and online listings, which can cost anywhere from a few hundred to several thousand dollars, depending on the package.
“While some fees are justifiable for quality service, it’s important to question what you’re getting for your money. Are the fees in line with local averages? Does the agent’s marketing strategy justify the cost?”
Scott said that while the market remained appealing for owner-occupied properties, investors should review their finances and property strategies before taking the plunge.
“Obviously, if you need somewhere to live, then market dynamics don’t really matter as much.”
“If you’re just thinking about property as an investment, then I think there are better options elsewhere, at much lower risk, over 2026,” he concluded.
