What to expect in Australian property during 2026
One of the biggest surprises last year was just how sticky inflation remained, particularly towards the second half of the year. I must admit I got my inflation timing wrong. It’s held up more than expected, and I had previously thought that it would remain a rearview problem.
It seems like inflation will stick around for a little longer, so a different gameplan for investors emerges this year.
The way gold and silver have continued to run up in recent months gives us clues. A further indicator to me that investors are starting to price in higher inflationary expectations. I think those who buy gold are really just substituting one type of money for another. Silver is more speculative, like crypto.
The gold run suggests more inflation in coming years, particularly if we price inflation in dollars. Currency debasement continues to be a multi-generational theme. The US and all other developed economies are running up large debt amounts, because they can always print more of their own currencies.
The consequence is inflation and lingering inflationary expectations. And that’s where we find ourselves in 2026. At a crossroads between sluggish economic growth but a flight away from paper money into hard assets.
Australia’s residential real estate market remains well-placed to benefit, as long as the government stays out of the way. The biggest risk to Australian property prices is taxation. Even if negative gearing incentives are eventually changed, the fundamentals behind demand and supply and the growing debasement of dollars will continue to push property prices higher.
But don’t expect the same markets to do well.
2024-25 was driven by affordable markets rising in anticipation of interest rate cuts and government incentives. If rates stop falling, 2026 will be a different game. More middle and premium markets will start to move, as they tend to have the tightest supply and the largest pools of wealth circling.
I’m also cautious on the bottom end markets because government incentives might be pared back, especially the Home Guarantee Scheme implemented in October last year which hasn’t made housing more affordable for first time buyers, instead the opposite.
2026 will see a flight to quality and a consolidation in the bottom end of the market. Income growth will be the key driver and I’d be trying to stick to markets within 10km of all the major metro CBDs where rental growth will become the single most important indicator of price growth. Rental growth, not yields, but actual growth in rental income. This is the gameplan in 2026.
I’ll be posting more content this year, so make sure you Subscribe to get each note delivered directly to your inbox (if you haven’t already). I’ve also got a new podcast series in the works, with a major sponsor working through some final details before we launch towards the end of the first quarter.