Domain’s Forecast Report 2026 predicts Sydney will record the strongest house price growth of any Australian capital this year, pushing the city’s median house price to approximately $1.92 million by year’s end, while Melbourne is expected to stage a full recovery and continue rising toward an expected $1.17 million.
The forecast describes a distinct two-phase cycle playing out across 2026 — a strong first half driven by the lagged effects of earlier rate cuts, rising incomes, and policy support, followed by a natural slowdown in the second half as affordability limits re-emerge, particularly in Brisbane, Adelaide, and Perth.
What’s Driving the Growth
According to the report, the expansion of the First Home Guarantee Scheme stands out as the single most influential demand driver shaping the market in 2026. The scheme allows eligible first home buyers to purchase with a smaller deposit while avoiding Lenders Mortgage Insurance, materially increasing the pool of buyers able to enter the market at any given price point.
Near record-low rental vacancy rates are compounding the effect, pushing more renters toward purchasing as rental costs in many areas approach or exceed comparable mortgage repayments.
Why the Second Half Looks Different
Despite the strong outlook for the first half of the year, Domain’s analysis points to affordability becoming a genuine handbrake on growth by the middle of 2026, particularly in markets that had been running hot — Brisbane, Adelaide, and Perth specifically are flagged as most likely to see growth moderate as price levels test the limits of what local incomes can sustain.
This pattern is consistent with broader economic commentary suggesting the RBA is now at or near the bottom of its cutting cycle, with growing talk that the next rate move could be upward rather than downward — a dynamic that would further cool buyer demand in the back half of the year.
What It Means for Different Buyers
For existing homeowners, the forecast points to continued, if moderating, capital growth through 2026. For first home buyers, the expanded guarantee scheme genuinely improves access despite high headline prices, though the report’s own numbers make clear that affordability pressure doesn’t disappear, it simply shifts in where and what buyers can purchase. For investors, the combination of strong capital growth in the first half and tightening rental markets continues to support the case for well-located property, even as the growth rate moderates later in the year.
Epik Wire tracks Australian property market forecasts and data throughout the year. Subscribe to our newsletter for the latest updates.
