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A cautious market for many, an opportunity for the eagle-eyed.

Australia’s property market is navigating a more cautious, high-interest rate environment, while still presenting opportunities for informed buyers. This report focuses on the balance between rising inflation, tighter monetary policy, and resilient economic fundamentals, alongside shifting buyer behaviour, improving (but still strained) affordability, and growing first home buyer activity. While uncertainty has slowed momentum and tempered confidence, underlying market strength and reduced competition are creating strategic entry points for those ready to act.

May 13 2026

A cautious market for many, an opportunity for the eagle-eyed.

The latest Australian Economic and Property Report from PRD shows the changing property market in the current economic climate.

After a brief window of rate relief in 2025, Australia’s property market entered 2026 with renewed pressure. Two cash rate increases in February and March lifted the rate by a combined 50 basis points to 4.1%. These increases have reshaped buyer behaviour and sharpened the focus on affordability.

The start of 2026 is in stark contrast to early 2025. Back then, the promise of a cash rate cut excited the market. Early 2026 started with a whisper of a potential cash rate hike. This became a reality in February 2026, and the market did respond, but not with such urgency that demand suffered and property prices dropped. The Middle Eastern conflict has exacerbated and accelerated inflation risks in all countries, including Australia. The Reserve Bank’s (RBA) original February 2026 inflation predictions were significantly revised, prompting a tighter monetary policy with cash rate hikes in March and May.

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PRD Real Estate Australian Economic & Property Update 1st Half 2026

Why This Report Matters

This report matters because it cuts through uncertainty and gives buyers a clear, data‑driven understanding of where the property market is heading and where opportunities may exist. With rising interest rates, shifting affordability, and cautious sentiment, it helps readers move beyond headlines and make informed decisions based on real economic and market indicators. By combining national trends with insights into buyer behaviour, supply, and future conditions, it equips prospective buyers, especially those ready to act, with the confidence and clarity needed to navigate a more complex and competitive market.

What You’ll Learn

In this report, you will gain a clear understanding of how Australia’s economic conditions, particularly rising inflation and interest rates, are shaping the property market in 2026. It explains how recent cash rate hikes, global uncertainty, and shifts in consumer confidence are influencing buyer behaviour, while also showing that key economic fundamentals such as employment, wage growth, and household resilience remain relatively strong. Together, these insights help paint a balanced picture of a market that is cautious but not weakened. By combining current data with forward-looking insights, it equips readers with the knowledge they need to make confident, informed decisions in a shifting property landscape.

Key Findings

Key findings include:

Buyers are cautious; however, demand remains steady. The time-to-buy a dwelling index has held steady in the past 12 months, sitting at 85.8 index points as of April 2026. This suggests market resilience and steady buyer sentiment. Capital city market buyers did see a decline in confidence, but non-metro buyers did not.
Across different states there is a mixed view on whether now is the time to buy a property. New South Wales (NSW) and Queensland (QLD) were the only 2 states that saw an increase in the time-to-buy-a-dwelling index, with NSW recording 92.6 index points, the highest recorded since 2022.
House prices are still extremely high, but there is evidence of a slower pace of price growth in some capital cities. Unit price growth has now eclipsed house price growth; however, units are still the more affordable stock. That said, the price gap is narrowing, from previously approximately 35% cheaper to now only 20-25%.
Rental affordability improved slightly in the past 12 months, with the median family income needed to cover rent at 24.3% as of December quarter of 2025. The changes in negative gearing and capital gains tax, as per Federal Budget 2026/27 may impact this, if too many investors are spooked and exit.
The number of first home buyers has increased by 9.9% in the past 12 months to December qtr. 2025. However, this has come at a cost, with the average first home buyer loan amount increasing by 11.8%.
Australia, USA, France, and Canada have increased residential construction. Units remain a key future housing supply in Australia, except for Adelaide. Townhouses are gaining traction, with Brisbane taking the lead.