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Australian Housing Market Forecast

  • Andrew Hill
  • Dec 12, 2025
  • 4 min read
Finger pressing a green power button in place of zero in "2026." Text: No More Rate Cuts, But Could Hikes Loom? Is your mortgage ready?

The Reserve Bank of Australia (RBA) closed out the year with a steady hand, holding the cash rate at 3.60%—a unanimous decision that caps a brief run of cuts earlier in 2025. The tone, however, has shifted: while relief is on hold, vigilance is in. As Governor Michele Bullock told journalists:


“We didn’t consider the case for a rate cut at all… additional cuts are not needed.” [accounting…mes.com.au]


With inflation risks now tilted to the upside and a cautious view on new data, the Board emphasised that decisions will remain meeting by meeting.

How might this shape your mortgage strategy for 2026? Let’s break it down. [rba.gov.au]


Why Did the RBA Hold?

Inflation Dynamics (and data caveats)

Inflation has fallen from its 2022 peak but picked up recently, and the Board judged some of the underlying rise may be temporary. Importantly, the RBA warned against reading too much into the new monthly CPI series—it’s volatile and still being assessed.Question: Do you think monthly price moves are telling the full story—or just noise? [rba.gov.au]


Economic Activity & Housing

Private demand is recovering, driven by consumption and investment; housing activity and prices continue to rise. Financial conditions have eased versus early 2025, with credit readily available.Prompt: Are you seeing stronger confidence in your business or household spending? [rba.gov.au]


Labour Market & Wage Pressures

Underutilisation remains low; capacity utilisation sits above long‑run averages. Wage growth has eased from its peak but unit labour costs remain high—another reason for caution.Prompt: Would a modest rise in rates materially change your employment or hiring plans? [rba.gov.au]


What Governor Bullock Signalled

The Governor was unusually explicit about the policy path:

“I don’t think there are interest rate cuts on the horizon for the foreseeable future. The question is, is it just an extended hold—or is it the possibility of a rate rise?” [abc.net.au], [realestate.com.au]


She also reiterated:

“If inflation pressures look to be more persistent, then that does raise some questions.” [accounting…mes.com.au]

On the inflation target, she noted we’re still “quite a way” from the midpoint and doesn’t expect inflation to “come down below three for another 12 months”, adding the RBA is “uncomfortable” with where inflation sits. [accounting…mes.com.au]


And the Board’s stance remains data‑driven:

“When things change, you have to change your view.” [accounting…mes.com.au]

Economists described the press conference tone as a “giant leap into hawkish territory”, with February now a ‘live’ meeting depending on the December‑quarter CPI (due 28 January). [accounting…mes.com.au], [realestate.com.au], [sbs.com.au]


RBA Interest Rates 2026: Held—for Now, With Upside Risks

  • Cash rate: 3.60%—held at the final 2025 meeting. [rba.gov.au]

  • Forward lens: The Board will reassess after December‑quarter CPI and labour data; a hike is not ruled out if inflation persistence is confirmed. [rba.gov.au], [rba.gov.au]

  • Market commentary: Several analysts moved from expecting further cuts to an extended hold, with risks skewed upward.


    Question: Would locking a portion of your loan into a fixed rate help you sleep better? [westpaciq.com.au], [sharecafe.com.au]


Australian Housing Market Forecast 2026: Steady Gains Driven by Undersupply

Our outlook remains unchanged:

  • Detached houses: +3–6% nationally in 2026.

  • Attached dwellings: +5–7%.

    Undersupply, strong population flows, and tight rental markets should keep Sydney, Melbourne, and Brisbane in the lead.

    Prompt: Are you planning to buy or invest in 2026—and in which suburb?


What This Means for You

Homeowners

  • Review repayments and buffers.

  • Consider a partial fix to balance certainty and flexibility—especially with upside inflation risks in play.


Question: How much rate movement could your budget comfortably absorb? [rba.gov.au]


Buyers

  • With prices grinding higher, moving earlier can support long‑term affordability.

  • Get pre‑approval and ask about rate‑lock options.


Prompt: Would a 0.25% move change your buying window?


Investors

  • Rental yields remain supportive, but plan for a higher‑for‑longer rate path.

  • Stress‑test your cash flow and consider repayment buffers.


Prompt: Have you benchmarked your portfolio against a 0.50% rate increase scenario?


Next Steps to Watch

  • December‑quarter CPI (due 28 Jan): Crucial for testing inflation persistence. [realestate.com.au], [sbs.com.au]

  • February 2026 RBA meeting: First of the year—and ‘live’.


Question: Which data point would make you change your loan strategy first: CPI or unemployment? [realestate.com.au]


My Final Thoughts

The RBA’s cautious pause signals a clear shift: no further relief is expected, and rate increases can’t be ruled out. While the housing market looks set for steady gains and rates remain steady for now, this is a period to stay proactive and data‑driven.Ready to talk through options? We’ll help you structure a plan that fits your goals—whether you’re buying, refinancing, or reviewing your loan.


That is a wrap for my Australian Housing Market Forecast for 2026.



Sources (key lines cited above)

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.


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