Key takeaways
Despite access to extensive data, many forecasts will miss the mark, largely due to unpredictable factors like investor sentiment. Investor sentiment, currently at historic lows, will remain a critical, yet hard-to-quantify, influence on market movements.
Unforeseen events, or "black swan events," will shape the market unpredictably, as they do every year.
A handful of forecasts will hit the mark, often by chance. Those who get it right will claim expertise, but true forecasting success is rare and inconsistent.
Many property investors fail to benefit from long-term wealth creation: 20% sell within the first 2 years; 50% exit within 5 years, missing the compounding benefits of strategic property ownership. Waiting for the "perfect time" to invest often proves to be a mistake.
Savvy investors who act during quieter market conditions and focus on "investment-grade" properties in prime locations will thrive.
About this time each year it’s customary for those of us in the property industry to peer into the future in an attempt to predict what’s ahead for our housing markets.
While making such forecasts is not an exact science, I can safely make five predictions I am certain will be true for 2026.
1. Most predictions will be wrong!
My first prediction for the year is that it will be a bad year for those in the prediction business.
I’m sure this will be correct, as most economic and property experts get it wrong despite having access to all the research available in today’s information age.
The problem is that while the fundamentals (things such as population growth, supply and demand, employment levels, interest rates, affordability and inflationary pressures) are easy to monitor, one overriding factor that the experts have difficulty quantifying is investor sentiment.
Currently, investor sentiment is still relatively low; even though it has been picking up over the last few months.
2. Many things won’t happen, and others will
Many of the predictions for 2026 won’t happen, and a lot of things will happen this year that no forecaster thought to include in their predictions because market movements are far from an exact science.
Every year there is an ‘X factor’ — sometimes called a ‘black swan event’.
This is an unexpected factor, whether local or from abroad, that affects our markets positively or negatively.
However, in retrospect, these unexpected events will seem to be the obvious consequences of the current economic and political environment.
In 2024, no one really predicted that interest rates would remain so high for so long, or last year, very few predicted that Australia would have its longest per capita recession on record, or that the cost-of-living crisis would affect so many Australians.
And very few believed the wars in Ukraine or the Middle East would last so long, and I won’t even mention the predictions last year about the next American president.
3. Some forecasts will be right
I predict a small number of the many economic and property forecasts for 2026 will accidentally come true, and those who randomly predicted them will claim to be experts, despite the fact that it was the first time they got one of their hundreds of forecasts right and that they adjusted their forecasts over the year as circumstances unfolded.
4. Most property investors will get it wrong this year
This one is simple because they always do!
And I’m not talking about those who fail to take action this year and wait for things to be just right before they get into the market, even though that will be a big mistake this year.
What I’m talking about is based on data that shows 20% of those who do invest in property sell up within the first 2 years, and around 50% sell within the first five years.
These failed investors will never gain the long-term wealth-creation benefits that property investing is all about.
- Also read:November Reports More Strong Home Price Growth | Latest stats from Dr. Andrew Wilson
- Also read:52 years of valid reasons not to invest
- Also read:Why the ALP’s Grand Plan to Build 1.2 Million Homes Is Destined to Fail – A Reality Check
- Also read:Here’s how I’ll be investing in property in 2023
5. Those who get it right will do very well
And my last prediction is that those property investors who get it right will do very well out of real estate this year and set themselves up for the years ahead.
Those who saw previous quiet spells in the property market as a countercyclical opportunity have consistently done well for themselves.
They recognise that even though the property market has recovered and grown strongly over the last couple of years, there's still a window of opportunity to get in and buy the right property, as we're in for a further period of strong capital growth.
However, not all investors who buy a property will get it right.
That’s because you can’t just buy any property and expect it to outperform in the long term.
The key is to buy the right type of property in the right location.
At this time in the cycle, correct asset selection will be critical as our markets will be fragmented moving forward.
You need to buy an ‘investment-grade’ property below its intrinsic value and one that has a ‘twist’.
There needs to be something special about it — like value-add potential that allows you to manufacture capital growth through renovations or redevelopment.
Ideally, you should consider purchasing in the inner or middle-ring suburbs of our major capital cities, in areas with a historical pattern of above-average capital growth, regardless of the ups and downs of the property cycle.
Why?
Because the value of property in good locations will continue to increase in the future due to scarcity.
And when interest rates eventually fall and consumer confidence returns, an improving economy, jobs growth, population growth, the shortage of the right type of property as well as significant infrastructure spending will all have a positive impact on this type of property.
A few more property predictions for 2026
- Property prices will reach record highs across all capital cities by the end of 2026.
- It will be a year of 2 halves. The first half of the year will see strong momentum as the effects of interest rate cuts, rising incomes and policy support flow through, while the second half of the year is expected to see a natural slowdown as affordability limits re-emerge, particularly in Adelaide and Perth
- The expansion of the First Home Guarantee Scheme will be the single most influential demand driver in 2026.
- State governments will continue to introduce legislation favouring tenants and taxing property investors, which will continue to motivate some investors to sell up – thereby making the rental shortage worse.
So the big question is …
What will 2026 bring your way in terms of wealth creation and the property markets?
