Tight rental markets and affordability constraints to define lending landscape
Federal incentives and state policy shifts are expected to shape a broadly steady but divergent housing market in 2026, as buyers and borrowers continue to grapple with affordability constraints, higher interest rates and limited supply, according to the Real Estate Buyers Agents Association of Australia (REBAA).
REBAA president Melinda Jennison (pictured top) said the national picture remained mixed, with some cities cooling as higher rates and extra stock tempered gains, while other areas seen as better value continued to climb.
“While some markets have experienced softer conditions as higher rates and rising stock levels took the heat out of price growth, others, particularly those still perceived as relatively affordable, have remained resilient, underpinned by population growth, tight rental markets and limited new housing supply,” Jennison said.
“Across the country, demand for well-located, quality homes and investment-grade assets have remained solid, even as many buyers adjust expectations on budget, location and dwelling type.”
Jennison said federal schemes, including the First Home Guarantee, were drawing more first‑time buyers into lower‑priced segments, while upper‑end markets were normalising after earlier surges. She added that professional buyers’ agents were increasingly used to source off‑market opportunities and manage due diligence in competitive conditions.
In New South Wales, REBAA state representative Linda Johnson said 2025 had brought a firmer-than-expected upswing, with both houses and units rising and many regional centres outpacing Sydney.
Demand spreading beyond urban centres
Scarce listings and near‑record‑low vacancies are pushing prices and rents higher, while demand has spread from inner blue‑chip suburbs to more affordable middle‑ring areas and transport corridors.
Recent rental reforms and a crackdown on underquoting have added regulatory complexity, while the Minns government’s low- and mid‑rise policy is starting to shift developer focus, even as forecasts still point to a dwelling shortfall later in the decade.
In Victoria, REBAA’s Matt Scafidi reported that Melbourne has moved out of its flat 2024 phase into a clear recovery. Prices have been rising through the second half of 2025, with auctions returning in force and October delivering the city’s strongest auction weekend in four years.
“Analysts are tipping Melbourne to hit new record highs by the end of the first quarter of 2026, which says a lot about where the market is heading,” Scafidi said. “For buyers, now is one of those rare countercyclical windows – prices are still below previous peaks, sentiment is improving, and competition is building but not yet crazy. If you focus on high-quality, investment-grade homes in tightly held suburbs, the next 12 to 24 months could be very rewarding.”
Meanwhile, Perth and Adelaide remain among the nation’s strongest capital city markets, supported by low listings, firm rental yields and continued in‑migration.
Tasmania, the ACT and key Queensland and regional hubs show stable to positive conditions, with competition most intense in affordable brackets aligned with First Home Guarantee price caps.
Across all states, REBAA expects tight rental conditions, limited new supply and moderate, uneven price growth into 2026. For brokers and lenders, that points to ongoing demand from first-home buyers and upgraders, cautious but active investors, and continued sensitivity to rate movements and serviceability policy.
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