Australia's housing market opens 2026 on a positive note, signaling resilience amid changing economic conditions. According to the latest Cotality Home Value Index, national dwelling values rose by 0.4% in January, marking the 13th consecutive month of growth. However, this rate reflects a notable slowdown from the peaks experienced in mid to late 2025, as affordability constraints and higher debt servicing costs come into play. With dwellings gaining an impressive 8.6% in value throughout 2025, translating to roughly $71,400 in equity for the median homeowner, there are signs that the market is shifting toward more moderate growth.
As we delve deeper into the nuances of Australia's housing landscape, regional disparities emerge, highlighting why some markets are flourishing while others grapple with stagnation. Notably, Perth leads the charge with a 1.6% increase in January and an astounding annual growth rate of 16.7%. In contrast, major capitals like Sydney and Melbourne are showing signs of cooling, with January growth rates of just 0.2% and flat activity, respectively. As cost-of-living pressures, tighter lending conditions, and low housing supply continue to shape market dynamics, understanding these factors is crucial for navigating the evolving housing landscape in 2026.
Australia’s housing market opens 2026 on a positive note: A closer look at growth trends
Australia’s housing market opened 2026 on a positive note, buoyed by a 0.4% rise in national dwelling values according to the latest Cotality Home Value Index. This growth marks the 13th consecutive month of price increase, indicating a sustained trend of recovery since January 2023. However, the figures also reveal a slowdown in growth, highlighting that January’s rate is the lowest since the recovery began and significantly below the monthly average of 0.6% recorded throughout 2025. Despite this deceleration, dwelling values rose by an impressive 8.6% over 2025, translating to approximately $71,400 in added equity for the median homeowner.
As the market navigates these changes, several factors come into play that contribute to the ongoing price growth, albeit at a moderated pace. Affordability constraints, rising debt servicing costs, and shifting expectations around interest rates loom large for prospective buyers, shaping a more cautious market environment. Even so, the combination of low housing supply and persistent buyer demand suggests that while price increases are tapering off, the potential for continued growth remains. Buyers and investors should remain attuned to these trends in 2026, particularly as market dynamics evolve across different regions and segments of the housing market.
Regional disparities in performance: Why some markets are thriving while others cool
In January 2026, Australia’s housing market exhibited stark regional disparities, with some cities experiencing robust growth while others struggled to maintain momentum. Perth stood out as a leader, boasting a remarkable 1.6% increase in dwelling values for the month and an impressive 16.7% annual growth rate. Factors such as strong internal migration, a tight rental market, and a limited housing supply have spurred buyer demand in the region. Adelaide and Brisbane also performed well, with monthly growth rates of 1.1% and 1.0%, respectively. These markets benefit from relatively affordable property options compared to major cities like Sydney and Melbourne, attracting homebuyers and investors seeking value.
Conversely, Sydney and Melbourne exhibited slower growth, with Sydney's values rising by just 0.2% and Melbourne remaining flat in January. These subdued results suggest that affordability challenges and weaker economic confidence are impacting buyer activity in Australia’s largest capitals. As prices continue to climb, potential buyers may hesitate due to high debt servicing costs and shifting interest rate expectations. This divergence in performance underscores how local economic conditions and demographic trends shape the housing landscape, highlighting the importance of understanding regional variations for both investors and homeowners navigating the current market.
Understanding the ongoing challenges: How affordability and supply affect the housing landscape
As Australia’s housing market navigates the early months of 2026, affordability constraints have emerged as a significant roadblock for many potential homeowners. The rising debt servicing costs combined with fluctuating interest rate expectations create an environment where financing a new home becomes increasingly challenging. Young professionals and families looking to enter the market face heightened pressure, as median dwelling values have surged, with a notable 8.6% increase over 2025 alone. This surge translates to an average added equity of around $71,400 for the typical homeowner, yet many individuals and families find themselves priced out of the desirable metropolitan areas, such as Sydney and Melbourne.
Supply issues compound these affordability challenges, influencing overall housing dynamics. In January, new listings fell below the five-year average, and the total stock available across major capitals was 17.6% lower than this benchmark. Markets like Perth and Adelaide are grappling with acute supply constraints, which further fuels price growth amid rising demand. As buyers contend with limited options and escalating prices, the housing landscape in Australia may continue to shift in favor of those regions where affordability and availability align more closely. Consequently, the intertwined issues of affordability and housing supply will significantly shape market developments as the year progresses.