Australia's housing market is poised for another year of robust growth, with experts forecasting a minimum 5% increase in property values for 2026, continuing the remarkable trajectory of recent years.

According to Cotality data, every state and territory capital city experienced price increases in 2025, with dramatic variations across different regions. Darwin led the pack with an astounding 18.9% rise, followed by Perth at 15.9% and Brisbane at 14.5%, while Sydney – the nation's most expensive market – saw a more modest 5.8% increase, with median home values now exceeding $1.28 million.

Despite potential headwinds like interest rate uncertainties and affordability constraints, property analysts remain optimistic. Tim Lawless, Cotality's research director, noted that while market momentum has slightly cooled, the persistent supply shortage will likely support continued price growth. 'A "higher for longer" interest rate environment and cost-of-living pressures have taken some heat out of the market, but we are unlikely to see a material supply response in 2026,' Lawless explained.

Major financial institutions are closely watching the market, with two of the four primary retail banks anticipating a potential rate increase at the year's first Reserve Bank meeting. SQM Research predicts capital city home prices could rise between 6% and 10%, with Perth, Brisbane, Adelaide, and Darwin potentially seeing double-digit gains. AMP's chief economist Shane Oliver forecasts a more conservative 5-7% growth range.

The ongoing property price surge has significant implications for younger Australians, with home ownership becoming increasingly challenging. Financial analysis reveals a stark transformation: 40 years ago, the average Australian could purchase a home costing 3.3 times their annual income, compared to more than 10 times today. The average city home price has skyrocketed from approximately $64,000 to nearly $1 million during this period.

Rental markets have also experienced substantial pressure, with national rent increases of 5.2% in 2025 and a five-year average annual growth rate of 7.4%. Finder's personal finance spokesperson Taylor Blackburn highlighted the generational shift, noting that 'today, Aussies face more years of saving, higher deposits, and larger debt, while pay packets haven't really kept pace.'

The broader market context reveals extraordinary growth, with Australian property prices increasing 46.8% over the past five years. Regional variations are particularly striking, with Perth and Brisbane markets surging 89% and 86.7% respectively. Investor activity, bolstered by policies like negative gearing and capital gains tax discounts, has further intensified market competition, creating additional challenges for prospective owner-occupiers.