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Market update: Housing crunch to support price growth in Sydney and Melbourne
According to Property Investment Professionals Australia’s latest National Market Update, Sydney and Melbourne have begun the year well-positioned to continue performing strongly throughout 2026.
PIPA chair Cate Bakos said that the nation’s housing market was being shaped by low stock and shifting affordability, which would continue to support prices even as economic conditions evolve.
“In New South Wales, buyer demand remains firm despite affordability pressures, with Sydney values now just 0.1 per cent below the record peak observed in November 2025,” Bakos said.
“Victoria is experiencing a more varied landscape, where strong competition for family homes contrasts with softer conditions in the prestige and inner city apartment sectors.”
Propertybuyer CEO Rich Harvey said in the early stages of 2026, the NSW property market had experienced steady buyer engagement.
“Low stock levels and ongoing demand are shaping price movements, while auction activity and rental conditions indicate a market gradually adjusting to current economic conditions,” Harvey said.
Harvey said that Sydney’s property market was overcoming the uncertainty caused by recent RBA rate hikes, with a preliminary auction clearance rate of 65.5 per cent – above historical norms.
“Vendors are showing a willingness to adjust pricing to achieve sales, reflecting the moderate but consistent market activity,” he said.
“We are seeing fewer active bidders at auction, but generally there are sufficient buyer numbers to see it sold close to the reserve price.”
Harvey said that despite the RBA’s cash rate rises weighing on affordability for some buyers, demand for well-located properties had remained resilient.
With vacancy rates below 1.5 per cent, Harvey said limited rental stock was sustaining competition among tenants and supporting investor interest.
He said that limited supply and heightened demand would be consistent themes across the state’s sale and rental markets throughout 2026.
“Looking ahead, affordability and potential for more interest rate rises remain headwinds, but the NSW property market is likely to see steady, if modest, growth through 2026,” Harvey said.
Similar to Sydney, National Property Buyers director Antony Bucello said that Melbourne’s 2026 property market performance would be dictated by resilient but inconsistent growth.
Bucello said that rather than a more uniform growth pattern, Melbourne’s property market had shown uneven suburb-level price growth.
“Auction activity remains robust, reflective of steady buyer engagement despite broader economic pressures, although signs of a slight cooling have emerged,” Bucello said.
“Consistent auction clearance rate performance suggests that buyers are still prepared to compete at auctions, especially in desirable middle-ring and established suburbs.”
Bucello said price performance varies significantly across Melbourne’s property market, influenced heavily by property type and suburb.
He said that demand for family homes in the middle-ring suburbs and houses under $1 million in the city’s outer suburbs had seen strong demand, as had town houses and villas.
By contrast, Bucello said that prestige properties had shown limited price growth, with tighter borrowing capacity limiting the number of interested buyers.
While the topic has been discussed ahead of every budget announcement for the past 20 years, Bucello said the proposed changes to negative gearing and CGT will influence the Melbourne market.
“We will just have to wait until the May announcement, but if changes are brought in, they are unlikely to significantly affect existing investors with only one property, who make up roughly two-thirds of residential investors,” Bucello said.
Bucello said that Melbourne had experienced a strong start to the year and had developed the fundamentals to resist any significant poor performance for investors.
“Despite solid overall performance this quarter, the market is far from uniform, and some short-term volatility may emerge as broader economic conditions continue to play out,” Bucello concluded.
“However, Melbourne’s property market retains strong long-term fundamentals, including steady population growth and significant infrastructure investment.”
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