Key takeaways
National home values rose by 0.8% in January, a slight acceleration from the 0.6% growth in December, though momentum in major growth centers like Perth and Brisbane is beginning to ease from previous cyclical peaks.
The lower quartile of the market outperformed the premium sector significantly, with a 4.7% rise over the last three months compared to just 0.3% in the upper quartile, reflecting a concentrated demand for affordable housing.
Record-low inventory levels, with listings 25% below the five-year average, continue to support prices even as the market faces new headwinds from the February interest rate hike and tighter APRA lending restrictions.
The Australian housing market started the year on a positive note, with national home values rising by 0.8% in January.
This represents a slight acceleration from the 0.6% increase seen in December.
While growth remains broad-based, with every capital city and rest-of-state region recording gains, the market is showing signs of a "multi-speed" dynamic as affordability constraints and credit conditions begin to weigh on demand.
The mid-sized capitals—Perth, Brisbane, and Adelaide—continue to lead the national growth, although their monthly momentum has eased from previous cyclical peaks.
Note: Sydney and Melbourne saw modest rebounds after slight dips in December, but they remain slightly below their recent record highs.
Capital City Performance in January
While all capitals rose, the performance across different price segments varies significantly, with the lower end of the market consistently outperforming premium segments.
| Capital City | Monthly Value Change (January) | Key Trend |
|---|---|---|
| Perth | 2.0% | Strongest gain nationally; median rising by ~$19k per month. |
| Brisbane | 1.6% | Strong growth continues; units (+18.3% annual) outpacing houses. |
| Adelaide | 1.2% | Fading from the Dec peak; median house value approaching $1M. |
| Darwin | 1.5% | Double the national benchmark; annual growth reaches 19.7%. |
| Hobart | 0.5% | Modest growth; remains one of the most affordable capitals ($722k). |
| ACT (Canberra) | 0.3% | Lower end of the spectrum; the unit sector continues to weigh on results. |
| Sydney | 0.2% | Modest rebound; growth led by a 1.0% rise in the lower quartile. |
| Melbourne | 0.1% | Slight recovery; values remain 0.7% below March 2022 record highs. |
Source: Cotality, February 2026
Market Dynamics and Supply Constraints
Persistently low supply remains the core factor supporting home values despite broader economic headwinds.
- Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To Now After The Rate Rise.
- Also read:Melbourne property market forecast for 2026 | Is it a good time to invest in Melbourne?
- Also read:Brisbane Property Market Forecast [2026] – What’s Ahead & Where to Invest
- Also read:Sydney property market forecast for 2026. Is it a good time to invest in Sydney?
- Also read:Adelaide housing market update | February 2026
Advertised stock levels in January were tracking approximately 25% below the five-year average, maintaining upward pressure on prices.
| Metric | National Figure (January 2026) |
|---|---|
| Monthly Home Value Change | 0.8% |
| Annual Rental Growth | 5.4% (+$35.20 per week) |
| National Vacancy Rate | 1.7% (Up from 1.5% in Sept) |
| Regional Markets Growth | 1.0% (Outperforming combined capitals) |
Source: Cotality, February 2026
The Rise of the Lower Quartile
A defining feature of the current market is the intense competition for affordable housing.
Across the combined capitals, lower quartile house values rose 4.7% over the three months to January, significantly outperforming the 0.3% rise seen in the upper quartile.
This trend is driven by first-home buyers and investors navigating stretched serviceability buffers and a high-interest-rate environment.
Note: Rental markets also remain extremely tight. The median rent increased by approximately $35.20 per week over the past year, which is increasingly nudging long-term renters toward home ownership as mortgage repayments become more comparable to rental costs.
Outlook and Downside Risks
The outlook for the remainder of 2026 suggests a year of softer, more uneven growth as housing demand navigates an increasingly complex mix of factors:
- Interest Rates and Inflation: The 25 basis point hike in February and persistent inflation forecasts have eroded borrowing capacity and consumer confidence.
- Credit Regulation: APRA’s new limits on high Debt-to-Income (DTI) ratio lending, effective February 1st, signal a more cautious lending environment.
- Serviceability Barriers: The 3% serviceability buffer remains a formidable hurdle for prospective buyers as values rise faster than incomes.
- Normalising Migration: Post-COVID population growth is moderating toward long-run averages, removing some of the extreme demand pressure.
Overall, while a material downturn appears unlikely due to low supply and a resilient labour market, the pace of value growth is expected to continue losing momentum throughout the year.
