Forecast predicts Sydney and Melbourne house prices to fall
- 14 hours ago
- 2 min read
Australia’s property outlook is becoming more uncertain, with analysts now divided over whether prices will continue rising or begin to fall in some major cities.
New forecasts from SQM Research suggest housing prices in Sydney and Melbourne could decline in 2026. The firm now predicts Sydney property prices may drop between 2% and 6%, while Melbourne could fall between 1% and 4%.
The updated outlook marks a sharp shift from earlier predictions released late last year, when analysts expected strong growth across most capital cities.
According to SQM, rising energy costs, higher inflation and the risk of further interest rate increases from the Reserve Bank of Australia are putting pressure on the housing market.
Under the revised forecast, overall growth across Australia’s capital cities may slow to 0%–3%.
Other financial institutions also expect weaker conditions, though not all predict price falls. Economists at Commonwealth Bank of Australia say recent interest rate increases could significantly slow housing price growth through 2026 and 2027.
Markets such as Brisbane and Perth are still expected to perform better in the short term due to strong demand and limited housing supply. However, growth in those cities is also expected to slow over time.
Rising global energy prices — partly linked to tensions in the Middle East — are also adding pressure to household budgets. Higher fuel costs and living expenses could reduce the number of buyers able to enter expensive housing markets.
Analysts say cities like Sydney and Melbourne are particularly sensitive to interest rate increases and affordability pressures.
While some experts still expect modest growth, others warn that continued economic uncertainty could lead to a cooling property market in Australia’s largest cities over the next two years.
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