What will happen to property prices in 2026?

As 2025 comes to a close, a plethora of 2026 price forecasts will appear in the news. To be clear, confidence is exceptionally high, and sentiment, in itself, does drive prices.

But what is interesting to note is that no one really knows, as 2026 is as unpredictable as any other year in history. Still, there are several scenarios worth playing out. SQM released their Boom and Bust report this week, a great read every year.

When I think about 2026, the first point to consider is not how strong demand will be but what will happen with supply: available listings.

Sadly, it's not what real estate agents or mortgage brokers want to hear, but I firmly believe it will be another dire year for new listings. This trend has been going on for 10-15 years, not just the last 5 years.

The first change will be fewer Investors looking to sell than in the last few years, as price-growth expectations have flipped. It makes sense to hold with prices rising.

Secondly, Downsizers will likely hold on to capture the tax-free growth momentum, and it makes sense to wait before selling. There are also very few options for them to consider, combined with few new properties, given that they are only now receiving development approval, let alone being built.

Finally, and most importantly, despite it making more sense, Upgraders will repeat 2022-2025 and mostly sit on their hands until rate certainty is higher again. They are coming back, but rate expectations drive their behaviour more than others.

So if listings stay low, what will demand do?

It doesn't take a rocket scientist to see that the expanded 5% Deposit scheme for First Home Buyers is blowing out Treasury's total price increase expectations of 1-2% in just one month post-launch, let alone over the coming years. It is a disastrous move for affordability, bringing forward years of future demand to an undersupplied market.

Combining this with some of the strongest Investor Lending we have seen in years, and the slowly growing demand from opportunistic upgraders, the demand is strong.

To be clear, loan servicing limits are holding back price growth, but buyers are just switching suburbs to buy today, as they don't have the capacity to spend more and don't want to wait for fear of opportunity cost.

So in my mind, 2026 could go two ways:

1. RBA rate-cut expectations rise again, we could see FOMO kick in, as in the second half of 2025.
2. If 2027 interest rate expectations trend higher for longer, the market could still tick along due to the structural failings of not building enough to own, and just as importantly, rent. Combined with too much demand being created over recent years, with record-breaking migration and pent up demand due to strong household formation.

Time will tell.