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Despite high property values and economic uncertainty, the 2026 market is set to see resilient buyers, modest growth, rising rents, and investment opportunities, according to McGrath CEO John McGrath.
McGrath CEO John McGrath has shared his top predictions for the property market in 2026, projecting increased buyer confidence despite continued tough economic conditions, such as high property values and interest rates.
“I expect to see an increase in buyers’ resilience, creativity, and determination to gain a hold on the property market, regardless of continued high values,” he said.
Interest rates
McGrath said further interest rate cuts could fuel momentum in the property market later in the year, with more drops possible by the end of 2026.
Last year, three rate cuts brought the cash rate down from 4.35 per cent to 3.6 per cent – the lowest figure since April 2023.
“As global economic and political uncertainty stabilise over the next 12 months, property demand will escalate, and prices will rise – but perhaps not until we get another much-awaited interest rate cut or two,” McGrath said.
However, he noted that, with some underlying economic issues still unresolved, some sellers may choose to wait until conditions have further normalised.
Melbourne
McGrath said that despite Melbourne’s values lagging behind the rest of the nation, the struggling market could bounce back this year amid modest growth.
Cotality’s December national Home Value Index showed growth in Melbourne, and Sydney was falling behind the rest of the nation, with values sliding 0.1 per cent lower.
McGrath said that, despite being negatively affected by recent government decisions, he believed Melbourne would catch up with the rest of Australia’s major property markets this year or next.
“Certainly, if you’re looking for great value, either now or in the next three or four years, Melbourne’s probably the best place to do this.”
Sydney
While McGrath forecast Melbourne would bring high value for buyers in the near-future, he said Sydney had a more grim outlook, with houses out of reach for many.
He said that first home buyers will continue to be priced out of the market, with Sydney’s median house value being $1,587,709, according to Cotality’s 2025 final Home Value Index.
However, McGrath said buyers had other options, including looking at the apartment market or other locations in NSW such as the Central Coast and Wollongong.
“These two areas feature properties that are well under Sydney’s median value, and most importantly, they give buyers a chance to get into the market, even if they have to stay with ‘the bank of mum and dad’ a bit longer.”
Nationwide outlook
Looking more broadly, McGrath said that high-value increases in Darwin, Perth, and Brisbane were unlikely to continue in the long-term.
According to Cotality’s December Home Value Index, dwelling markets in these three markets increased between 18.3 per cent and 26.9 per cent across 2025.
“I believe high double-digit increases, year in and year out, can’t continue forever, because you’re either going to see a problem, or the market will need a breather.”
Investors win, tenants lose
McGrath said that rental prices were likely to keep rising amid a lack of housing supply, in good news for property investors, but bad news for tenants.
“Rents are likely to increase by another 5 per cent or more in most metropolitan markets, as the housing shortage continues to keep demand higher than supply,” McGrath concluded.
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