Can property prices surge again after five years of record growth?

Can Australian property prices really soar like they have over the past five years in 2026?

Money continues to pour into the property market in the face of some compelling statistics highlighting both the strains being placed on the market and the buying public’s financial resilience and determination to acquire real estate.

More loans are being issued at ever greater levels of debt acquisition.

Investors are leading the charge but owner-occupiers are hyperactive too.

Investor loans have surged to record levels, with 205,533 new loans issued in the past year, up 9 per cent year-on-year. Since 2021, investor lending has grown by a massive 26.4 per cent overall.

Money.com.au’s State-by-State Mortgage Insights Report, released Thursday (15 January), shows that the upswing is led by Victoria, where investor lending rose 12.9 per cent annually, alongside above-market growth in NSW and South Australia, both recording more than 10 per cent growth.

Owner-occupier lending was more muted but, in the face of record property prices around the country, still rose 2.7 per cent annually. The gap between investor and owner-occupier loan growth is most evident in NSW and Victoria, where investor loan growth is running around nine percentage points higher.

Queensland is one of the strongest owner-occupier markets in the country, with lending up 4.6 per cent annually, well above the national average. In contrast, investor lending grew 7.9 per cent, below the national rate and marking a sharp slowdown from recent highs.

NAB’s newly released January Housing Monitor also pointed out that new housing loan commitments have increased since early 2023, driven by investor demand.

Despite a cost of living crisis, periods of high inflation that is again raising its ugly head and higher borrowings associated with high property prices, only a small share of new housing lending is at high debt to income or loan to valuation ratios.

Housing loan arrears have edged up only marginally to 1 per cent of outstanding loans and remain highest for low-doc lending.

Money.com.au’s Property Expert, Debbie Hays, said that while investors tend to put their money into what’s already built, they’re also managing risk.

“Rather than chasing a single strategy, investors are diversifying across property types, which is typically a sign of a mature market, where buyers are balancing yield, future growth and development potential.

“Some are prioritising immediate rental returns through existing stock, while others are positioning for future supply shortages by buying land to build on or hold,” she said. 

What’s keeping pressure on prices?

Housing supply growth remains weak, with net additions to the dwelling stock well below the 2015 peak.

Whether hoping for a price reprieve as a first home buyer or capital growth as an investor, 2026 shapes up as a defining year that could define the market’s trajectory over the next half decade or more.

Record levels of migration and population growth have, along with restrained new housing supply, been cited as a primary driver of capital growth that nationally hit 8.6 per cent by the end of 2025, compared to wage growth of 3.1 per cent and inflation at 3.4 per cent.

Few observers are expecting property prices to fall in 2026, global international conflict or ruptures notwithstanding.

There are, however, some downward pressures accumulating.

According to NAB, rising approvals are flowing into an already large pipeline, keeping the number of dwellings under construction high.

Approvals and commencements for dwellings rose through 2025, indicating an increase in supply for 2026 that could alleviate price pressure.

Population growth is slowing, which means fewer additional people per new dwelling, prompting a rebalance of the market.

A slow but steady recovery in household incomes is underway, which may provide some relief to both buyers and renters in 2026.

For renters, vacancy rates are expected to slightly increase from record lows to more sustainable levels.

Interest rates removed from equation

Falling interest rates also contributed to higher property prices as demand surged for cheaper credit but that factor is unlikely to boost the market in 2026.

According to Martin Fowler, Partner, Pitcher Partners, the Australian economy only managed to avoid a recession by a combination of elevated government spending measures and an influx of new migrants. 

“Fortunately, in response to this rather grim situation and a softening in goods inflation, the RBA began to cut rates in February and since then, rates have been fallen from a peak of 4.35 per cent to the current setting of 3.6 per cent.”

Those rates cuts are likely to be offset by some RBA tightening in the year ahead. NAB now expects rates to rise by 0.25 per cent in February and then May, while CBA expect one 0.25 per cent rate rise in February.

Futures markets now predict a high probability that the cash rate will be 3.85 per cent by June and remain there for the rest of the calendar year. 

“We think the RBA will be gradual in its decision to resume hikes if it chooses to proceed,” Mr Fowler said.

“This would be consistent with their recent decisions to hike in 2022 before beginning to ease policy subsequently, (so) if inflation prints remain entrenched outside their target band of 2–3 per cent we would expect hikes are an increasingly likely prospect.

“The other part of the RBA mandate is full employment and given how tight our labour market remains we do not anticipate this being a factor in their decision making in the near term.

“In summary this suggests that potentially one hike or more may occur in 2026 if the RBA feels it has made insufficient progress in taming inflation.”

Continued growth or ‘incredible financial losses’?

Overall, the housing outlook is less optimistic for the year ahead compared to an overly buoyant 2025.

Tim Lawless, Cotality’s Research Director, said the softening hints at a weaker start to housing trends in 2026.

“Renewed speculation that the rate-cutting cycle is over and the next move from the RBA could be a hike has dented housing confidence.

“A ‘higher for longer’ setting on interest rates, alongside a resurgence in cost-of-living pressures and worsening affordability pressures, looks to have taken some heat out of the market, however, we are unlikely to see a material supply response in 2026 either, which should help to offset any downside risk to home values trending substantially lower.”

Domain research anticipates combined capital city home prices to rise about 6 per cent in 2026, with unit prices slightly less, on track to reach record highs by year-end.

Realestate.com.au’s Property Outlook report suggests growth of 6 to 8 per cent across combined capitals in 2026.

Michael Yardney, founder of Metropole Property Strategists, said 2026 is shaping up as a year of two very different halves, each driven by its own forces.

“I see 2026 as likely to be another year of national price growth - not booming, but steady - even though interest rates are not expected to fall again, because demand will continue to rise faster than supply can respond.

“I see strong property growth around Australia in the first half of 2026.

“While borrowing capacity won’t improve, confidence will, and we’re already seeing this with FOMO (Fear of Missing Out) evident on the ground.

“This will be enough to keep delivering solid national price growth, but the second half of the year will be shaped by the reality that buyers’ borrowing capacity will not materially improve.

“With interest rates steady rather than falling, household budgets will remain stretched, and wage growth will not keep up with housing costs, and many buyers are already at their borrowing limits.”

Aaron Scott, co-founder of bRight Agent, was more forthright, saying that despite the substantial growth in real estate over the past few years, investing in Australian property right now is “fraught with danger and could lead to incredible financial losses”.

“It’s dangerous to think that just because property has been hot over the past few years, that it will continue to be so over the next year or two,” Mr Scott said.

“There are already signs of weakness in the major capitals and signs of slowing growth in the smaller capitals.”

“The real estate market is definitely softening - especially from an investment point of view.”

He said supply and demand imbalances could shift rapidly and affordability limits were being reached.

“At a basic level, most people put the housing affordability problem down to a supply and demand imbalance - where net migration has outpaced the increase in the supply of available housing,” he said.

“This is an artificially generated situation in the sense that net migration can fluctuate rather quickly, especially on the back of continued pressure on government to curb migration and improve affordability.

“From an investment outlook perspective, any artificially generated demand without strong regulation in place is not a good fundamental basis to invest.”