News & Media

SOURCE: Mortgage Choice

WRITER: David Bonaddio

August 7, 2025

Melbourne is set to lead the nation for home price growth in 2026, with new forecasts suggesting a typical home could surge almost $65,000.

Nationally, house prices are only expected to increase by 4.5% next year, according to KPMG research.

Increases will be driven by improving sentiment, renewed investor activity and the growing likelihood of further rate relief.

KPMG has updated its national forecast and named Melbourne as the top-performing capital in 2026, with house prices expected to rise 6.6% — which would add $64,878 to the city’s current $983,000 house price median, based on latest PropTrack home value data. It would equate a whopping about $178 a day.

Melbourne unit prices in the city are also tipped to lift by 7.1%, increasing the $609,000 typical unit’s price by more than $43,000, and only surpassed by Darwin — with national growth only tipped for 5.1%.

KPMG chief economist Dr Brendan Rynne said Melbourne’s property market was on the verge of coming out of its post-Covid slumber.

“We expect strong gains next year, particularly in the unit market, where affordability is much more favourable,” Dr Rynne said.

Melbourne-based Mortgage Choice broker Rhys Elmi said demand in Melbourne was already picking up, especially among buyers trying to get ahead of future price growth.

“The people who were asking questions 12 to 24 months ago are finally acting,” Mr Elmi said.

“They know once rates fall, prices will rise, and they want to get in before that.”

Mr Elmi said most borrowers were still choosing variable rates, even as fixed rates fell below 5%.

“Ninety to ninety-five per cent of our clients are going variable,” Mr Elmi said. “Everyone’s expecting at least two more cuts over the next 12 months.”

Arin Russell Property director and buyers advocate Arin Russell said high-income Western Australian investors had already begun shifting their focus to Melbourne, looking to cash in “before the recovery accelerates”.

“They’ve had their Perth growth and now they’re diversifying,” Mr Russell said.

“We’re seeing people from Western Australia targeting Melbourne, some first-home buyers, some experienced investors, and they’re chasing value.”

In contrast, Perth’s house price growth is forecast to be just 1.6% in 2026, down from 4.7% this year. It would mean an about $15,000 increase, with Mr Russell tipping worsening affordability and tight land supply to force buyers to look elsewhere.

Perth is expected to grow significantly less next year than it did when it became Australia’s third most expensive capital in 2025. Picture: Getty

“There’s still demand in Perth, but it does feel like it’s tapering,” he said.

“And the government hasn’t kept up, they’re too far behind to catch up now.”

Sydney is expected to post $65,688 (4.2%) house price growth based on its current $1.564m median and a $52,460 (6.1%) lift in unit values next year, supported by strong employment and infrastructure-led demand.

Dr Rynne said Sydney’s sustainable growth was set to continue.

“The city offers world-class amenities, lifestyle, and job opportunities,” he said.

In Brisbane, the $1.067m median house price could rise a more modest $33,000 (3.1%) and units by $10,725 (1.5%) from $715,000, after years of rapid post-Covid growth pushed the city out of the “affordable alternative” category.

Adelaide, which has led house price growth nationally this year, is expected to gain a more restrained $46,716 (5.1%) from $916,000.

A 3.7% increase for units in 2026 would add about $23,000.

Canberra’s market is expected to rebound after a flat 2024, with house prices to rise about $46,000 (4.8%) from $959,000.

Canberra’s property market is set to pick up after a flat year saw it drop from the second-most expensive capital to the fifth most expensive. Picture: Getty

Units could be in for a 5.6% uptick, worth about $33,000 when applied to today’s $590,000 typical price.

Darwin is tipped to outperform on the rental and investment front, with units set to jump almost $30,000 (7.3%) for a $410,000 typical offering — the highest in the nation.

The Northern Territory’s typical house has been earmarked for a 5.1%, worth $30,804.

Hobart will record the slowest growth, with the city’s $710,000 typical house price only likely to gain $12,000 as it rises 1.7%. Its units will fare slightly better, with a 2.7% increase likely to equate to a $15,687 rise for a $581,000 home.