Despite economic headwinds from rising interest rates and Federal Budget tax changes, medium-term fundamentals remain robust, underpinned by chronic housing undersupply, sustained population growth, and solid household income growth.
Australia's three largest capital cities experienced varying apartment price growth throughout 2025, with Brisbane leading at 16.5% annually, followed by Sydney at 4.5% and Melbourne at 2.0%. Year-to-date growth to April 2026 shows Brisbane continuing to outpace at 6.4%, while Sydney and Melbourne recorded more moderate gains. The Reserve Bank's cash rate increase to 4.35% in May 2026 and negative gearing reforms are expected to moderate investor demand and transaction activity in the near term.
Rental markets remain exceptionally tight across all three capitals. Brisbane recorded the lowest vacancy rate at 0.8% in April 2026, followed by Sydney at 1.3% and Melbourne at 1.5%. As economic headwinds soften sales market demand, rental markets could see increased pressure as potential buyers remain renters longer. Brisbane rents are forecast to grow 6.5% through 2026, with Sydney at 4.5% and Melbourne at 4.0%, driven by sustained migration and limited supply additions.
Looking ahead, Brisbane is positioned for the strongest growth through chronic demand-supply imbalances, while Melbourne is expected to benefit from improved relative affordability and constrained new supply. Sydney presents a more measured outlook as mature market dynamics and stretched affordability temper momentum. Prime properties are showing resilience across all three capitals, outperforming broader market trends as quality and location continue to command premium interest.
