Triple whammy of higher rates, slower activity, affordability constraints to take froth off market
A sharp run-up in home values in Perth, Brisbane and Adelaide is expected to lose pace over the next two years, while Sydney and Melbourne are forecast to return to the front of the pack by the end of 2027, according to updated projections from ANZ economists.
ANZ has lowered its housing expectations, citing higher interest rates and weaker consumer confidence. The bank now expects prices across the combined capital cities to rise by 2.8% in 2026 and 2.1% in 2027, down from earlier forecasts of 4.8% and 3.8% respectively.
The revision follows a strong 2025, when capital city values rose 8.5% on the PropTrack Home Price Index.
More recent figures point to a cooling trend. National home prices lifted 0.3% in March, the slowest monthly rise since November 2024, aside from December.
Even with momentum easing, values remain well above pre-pandemic levels. Home prices are about 45% higher than before the pandemic, and in Perth, Brisbane and Adelaide, values have roughly doubled over five years.
ANZ’s outlook suggests the market’s divergence may narrow as affordability pressures intensify. The bank expects Sydney and Melbourne to record falls of 0.7% and 1.7% in 2026, before outperforming in 2027.
By contrast, growth in Perth, Brisbane and Adelaide is projected to slow markedly by 2027, to 1.5%, 1.4% and 0.2% respectively. That would be a material step down from 2025 outcomes of 12.8% in Perth, 14.6% in Brisbane and 17.2% in Adelaide.
| Home price growth forecasts: Australian capital cities | |||
|---|---|---|---|
| City | 2025 | 2026 forecast | 2027 forecast |
| Sydney | 6.4% | -0.7% | 2.6% |
| Melbourne | 4.5% | -1.7% | 2.9% |
| Brisbane | 14.6% | 9.7% | 1.4% |
| Adelaide | 12.8% | 5.7% | 0.2% |
| Perth | 17.2% | 12.3% | 1.5% |
| Hobart | 7.8% | 3.7% | 0.6% |
| Canberra | 4.2% | 1.6% | 0.5% |
| Darwin | 14.5% | 8.0% | 2.6% |
| Source: ANZ | |||
“Sydney and Melbourne markets are showing signs of slowing, and we expect them to underperform in 2026,” said ANZ economist Madeline Dunk. “Adelaide, Brisbane, Perth, Hobart and Canberra are likely to underperform in 2027 after a period of strong growth across many of the ‘smaller’ capitals.”
Dunk pointed out that “very low” listing volumes in several smaller capitals have helped keep prices supported into 2026. “As the year progresses, higher rates, slowing activity and affordability constraints are likely to slow price growth,” she added.
Industry commentary echoed the shift in conditions. “Sydney is working through a complex set of forces – rate uncertainty, CGT speculation, geopolitical instability, more stock on market and a more deliberate buyer,” said Will Gosse, director and acting chief executive at Sydney real estate agency BresicWhitney.
“Modest softening this year before recovery in 2027 is a reasonable read. The long-term fundamentals haven’t changed.”
Gosse said demand remained more resilient below $1.5 million, supported by first-home buyers using government assistance, while conditions were weaker above that threshold. “Above that, sentiment weakens considerably,” he noted.
“Buyers are cautious and risk averse in a way we haven’t seen for some time. Clearance rates are holding better in suburbs where supply is constrained and buyer conviction is high. Bondi and Woollahra are good examples of that right now.”
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