Housing confidence remains high, despite rising economic risks

Key takeaways

An overwhelming 87% of industry respondents expect dwelling values to rise over the year ahead, while only 3.5% anticipate prices will fall.

Queensland, Western Australia, and South Australia are identified as the most bullish markets, with 89% of Queensland respondents expecting price growth, more than half of whom foresee gains above 5%.

Sentiment in New South Wales is increasingly conditional due to "stretched serviceability," while Victoria continues to lag due to higher property taxes, softer population flows, and significant investor selling.

More than 75% of real estate agents reported increased activity following the expansion of the First Home Guarantee, with competition intensifying around scheme price thresholds.

Confidence across Australia’s housing market remains strong entering 2026, but the mood is splitting along state lines as affordability and interest rate jitters reshape the landscape, new Cotality research shows.

Findings from the Decoding 2026 report, based on responses from real estate agents and financial professionals across the property and finance sectors, show 87% of respondents expect dwelling values to rise over the year ahead, while only 3.5% anticipate prices will fall.

Almost half expect growth above 5%, highlighting the continued market optimism after widespread price gains through 2025.

Cotality’s December Home Value Index showed housing values rose across every capital city and regional market last year, with national dwelling values increasing 8.6% and adding around $71,400 to the median home value.

Momentum slowed toward the end of the year as affordability pressures intensified and interest rate expectations shifted.

Housing conditions were strong through most of 2025, which explains the broadly positive sentiment.

However, national averages distort the variation of performances and market conditions at a local level, and it’s those differences that are becoming more important as affordability and policy settings diverge.

Smaller states lead the outlook

Survey respondents identified Queensland, Western Australia and South Australia as the most bullish markets entering 2026, reflecting several years of strong performance.

In Queensland, 89% of respondents expect prices to rise, with more than half anticipating growth above 5%.

Western Australia recorded similarly strong expectations, with evenly spread demand across various price points that’s helped to support steadier growth.

The bullish outlook for South Australia is likely due to its relative affordability and limited supply.

Strong internal migration, tighter rental markets and a persistent shortage of housing have combined to support all three of these markets.

Those fundamentals remain largely intact but it’s not surprising to see Queensland and Western Australia agents optimistic about price growth in 2026 given their respective fundamentals and economic prospects.

New South Wales and Victoria face stronger constraints

Sentiment in New South Wales remains positive, though increasingly conditional due to high dwelling values and stretched serviceability, which results in more rate sensitive growth expectations.

Victoria continues to lag after recording the weakest state performance in 2025.

While most respondents still expect price growth, confidence is influenced by higher property taxes, reduced investor participation and softer population flows.

Victoria stands out for the scale of investor selling, policy settings and higher holding costs all of which have weighed on activity, even as first home buyers now account for a larger share of lending.

First home buyer support lifts activity

More than 75% of real estate agents reported increased activity following the expansion of the First Home Guarantee, with competition intensifying around scheme price thresholds.

Federal Treasury data shows more than 21,000 first home buyers have accessed the expanded 5% deposit scheme since October; however affordability remains a significant constraint with less than half of Australian suburbs below First Home Guarantee price caps, down sharply from a year earlier.

Confidence remains against but risks are building

While expectations for price growth remain largely positive, confidence within the industry is becoming more conditional due to affordability ceilings, interest rate uncertainty and uneven regional dynamics.

The market is entering 2026 from a position of strength however there is a cloud of uncertainty around inflation and interest rate settings as well as affordability challenges, all of which are likely to weigh on housing confidence.

However, given we aren’t likely to see a material supply response in 2026 either, this should help to offset any downside risk to home values trending substantially lower.

About Tim Lawless Tim is Research Director at Cotality (formerly CoreLogic), analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au