Key takeaways
KPMG forecasts national house price growth of 7.7% in 2026 despite expectations of further rate hikes.
Property prices and borrowing power often move differently, which may create opportunities for prepared buyers.
First home buyers, refinancers and investors may benefit from understanding how market conditions could affect their next move.
Australia’s housing market remains influenced by supply shortages, population growth and varying conditions across each capital city.
Australia’s property market continues to surprise many economists and borrowers.
For many Australians, particularly those hoping to buy their first home, a forecast of rising prices may feel discouraging. But understanding what's driving those forecasts, and what they could mean for your situation, may be more useful than waiting for conditions to change.
Despite higher interest rates and ongoing affordability pressures, KPMG forecasts national house price growth of 7.7% in 2026 despite expectations that interest rates will remain elevated.
The forecast comes at a time when many Australians are still navigating elevated mortgage repayments, tighter borrowing conditions and cost-of-living pressures.
Yet property values in several capital cities have continued to rise, supported by low housing supply, population growth, and strong competition for well-located homes.
For buyers, refinancers and investors, the bigger question may not simply be whether prices rise or fall, but what changing market conditions could mean for their own plans.
Why are house prices still rising despite higher interest rates?
Interest rates are usually one of the biggest factors affecting housing demand. Higher rates can reduce borrowing power and increase mortgage repayments, which may slow buyer activity.
For buyers, this highlights how market conditions can move in different directions at the same time. While some areas may see slower growth than others, constrained supply can continue supporting prices in certain markets.
According to KPMG, limited housing supply and continued population growth are expected to remain major drivers of property prices in 2026.
Housing supply across Australia has remained tight in many markets, particularly in capital cities where demand continues to outpace new construction. At the same time, migration levels have increased housing demand in both owner-occupier and rental markets.
Cotality’s Home Value Index shows housing market performance continued to vary across Australian cities during the higher interest rate environment.
According to the Global Property Guide, Australian house prices recorded annual growth in several major markets despite higher borrowing costs, reflecting ongoing supply-demand imbalances.
Different cities are also moving at different speeds. Markets such as Perth, Brisbane and Adelaide have generally recorded stronger recent price growth compared to Sydney and Melbourne, where affordability constraints are more pronounced.
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What higher rates could still mean for borrowers
While house prices may continue rising nationally, higher interest rates can still affect borrowers in practical ways.
For many Australians, the immediate impact of higher rates is on borrowing capacity and monthly repayments.
Even if property prices continue increasing, some buyers may find they can borrow less than they could during lower-rate periods because lenders assess serviceability using higher repayment buffers.
The table below provides examples of how interest rate changes may affect monthly repayments on $500,000 and $750,000 owner-occupier principal and interest home loans over a 30-year term.
Loan amount | 5.50% | 6.00% | 6.50% | 7.00% |
|---|---|---|---|---|
$500,000 | $2,839 | $2,998 | $3,160 | $3,327 |
$750,000 | $4,258 | $4,497 | $4,740 | $4,990 |
Repayments are estimates only and do not include fees or charges. Actual repayments will vary depending on loan features, lender policies and borrower circumstances.
Understanding how rate changes affect your own borrowing capacity and repayments, rather than a hypothetical scenario, is something an Aussie Broker can help you explore.
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What this could mean for first home buyers
For first home buyers, rising property prices can feel discouraging, particularly when affordability is already stretched.
Entering the market during a period of rising prices and higher interest rates can be challenging, especially for buyers who are still building a deposit or working within a tighter budget.
However, forecasts do not always translate into uniform price increases across every suburb or property type. Conditions can vary significantly between locations.
Some buyers may also benefit from:
exploring suburbs or property types with less buyer competition, which may open more options than expected
considering apartments or townhouses in areas with increased supply, which may improve affordability
checking eligibility for state-based first home buyer support programs
understanding available stamp duty concessions or exemptions before purchasing
exploring government initiatives such as the Home Guarantee Scheme
At the same time, waiting for more favourable market conditions can be difficult because property prices, interest rates and borrowing conditions can all change independently.
This is why many buyers focus on understanding what they can comfortably afford now rather than trying to predict short-term market movements.
An Aussie Broker can help buyers understand their borrowing power, compare loan options and explore what government schemes they may be eligible for.
Could refinancers benefit from changing market conditions?
Rising rates have also increased refinancing activity across Australia in recent years.
ABS lending indicators show refinancing activity remained elevated in the March quarter 2026, with borrowers continuing to refinance their home loans during the higher interest rate environment.
For refinancers, a rising property market may potentially improve equity positions, particularly for borrowers who purchased before recent price increases. Increased equity may create opportunities to:
refinance to a different lender
negotiate a more competitive rate
consolidate debt
access equity for renovations or investment purposes
However, refinancing suitability depends on individual circumstances, including income, expenses, loan size, and lender assessment criteria.
When assessing whether refinancing could be worth exploring, these are some of the key factors borrowers typically consider:
Factor | Why it matters |
|---|---|
Interest rate | A lower rate could reduce repayments |
Loan features | Offset accounts and redraw facilities may offer flexibility |
Fees and charges | Exit or application fees may apply |
Loan term | Extending the term may reduce repayments but increase interest over time |
Equity position | Equity may affect refinancing eligibility |
Reviewing a home loan regularly may help borrowers understand whether their current loan still suits their needs.
You might also be interested in: What to do if your mortgage repayments increase
What investors may be watching closely
Property investors are also likely to continue monitoring interest rates, rental demand, and housing supply closely throughout 2026.
Rental vacancy rates have remained low in many Australian cities, contributing to upward pressure on rents in some markets.
ABS lending indicators show investor lending activity has continued during the higher interest rate environment.
For some investors, rising property prices may support long-term capital growth expectations. Others may focus more heavily on rental yields, cash flow, and borrowing costs in the current rate environment.
Importantly, different property markets can behave differently during periods of economic uncertainty.
For example:
Market factor | Possible impact |
|---|---|
Low housing supply | May support property values |
Higher interest rates | May reduce borrowing capacity |
Strong migration | May increase housing demand |
Rising rents | May improve rental yields |
Slower economic growth | May affect buyer confidence |
Investors also need to consider that property markets can move through cycles, and forecasts can change over time depending on economic conditions.
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Why supply remains a major issue
One of the key themes supporting property prices has been Australia’s ongoing housing supply shortage.
The National Housing Supply and Affordability Council (NHSAC) has previously noted that housing supply is expected to remain below underlying demand across parts of Australia over coming years.
Construction costs, labour shortages, and planning delays have all affected the pace of new housing delivery.
At the same time, population growth has continued increasing demand for both owner-occupier housing and rentals.
This imbalance between supply and demand has been one of the major reasons many analysts believe housing prices have remained more resilient than expected.
However, housing supply challenges can affect buyers differently depending on where they are looking to purchase. Some outer suburban and regional areas may still experience different conditions from inner-city markets.
Could rate cuts change the outlook further?
Another factor many borrowers and investors are watching closely is the future direction of interest rates.
While KPMG’s forecast assumes the market could continue growing despite further rate increases, future monetary policy decisions will still influence housing activity.
If inflation moderates and rates eventually stabilise or fall, some analysts believe buyer demand could strengthen further as borrowing conditions improve.
However, economic forecasts can change quickly depending on inflation, employment, and global economic conditions.
For borrowers, this is why it may be helpful to focus on:
repayment affordability
financial buffers
long-term property goals
understanding different loan structures
reviewing lending options regularly
Rather than trying to time the market, many Australians focus on finding a loan structure that supports their broader financial position.
What borrowers can take away from the forecast
KPMG’s forecast highlights that Australia’s property market continues to behave differently from what many people might traditionally expect during higher-rate environments.
While higher interest rates can slow borrowing activity, supply shortages, migration and ongoing housing demand may continue supporting property prices in some areas.
For borrowers, buyers, and investors, the key takeaway may be that property decisions are rarely based on one factor alone.
Interest rates matter. But so do borrowing capacity, housing supply, personal financial circumstances and long-term goals.
Whether someone is buying their first home, refinancing an existing loan or exploring an investment opportunity, understanding current market conditions may help them make more informed decisions.
Talking to an Aussie Broker may also help borrowers understand what options could suit their circumstances in a changing market.
