According to PRD chief economist Dr Diaswati Mardiasmo, in 2026, investors will have to adapt their portfolios by balancing risk management with evaluated growth opportunities amid uncertain interest rates, moderating inflation, and uneven market performance.
She said that investors might have to be more cautious over the next 12 months, combining some safer investment properties with more high risks purchase.
“Investors should consider diversifying their portfolios and investing in lower-risk real estate opportunities, which will provide a “safety net” if larger investments fail due to economic and market conditions,” Mardiasmo told SPI.
“To maximise growth, their focus should be on resilient sectors such as multi-generational housing, build-to-rent communities and providing investment and first home buyers guides can increase purchasing rates to combat consistent affordability challenges.”
Additionally, Mardiasmo said that targeting high-demand locations and future growth catalysts, including major infrastructure projects like the Brisbane 2032 Olympics, can further strengthen returns and protect portfolios against market volatility.
Despite the opportunities, she encouraged investors to stay up to date with rapid economic shifts and market trends to ensure their portfolios remain competitive.
2026 market trends
Over the next 12 months, Mardiasmo said dwelling prices will once again be tied to interest rates, inflation, the global economy, and the first home buyer schemes.
“While inflation pressures could keep interest rates stable, a cash rate increase if inflation rises could slightly dampen demand but encourage buyers to act under safer conditions,” she said.
“A rate hike could also impact Melbourne’s market recovery and stabilise Sydney.”
Additionally, Mardiasmo said that high building costs, including wages, materials, land, and infrastructure fees, along with a slowdown in new construction, will likely make existing homes a more attractive option than new builds.
Following the continuous increase in house prices and the low supply, Mardiasmo said that time buyers will likely turn to higher-density living, especially in cities and densely populated areas.
“In the coming years, units, apartments, and townhouses are expected to see the highest demand due to growing affordability issues with houses.
“More specifically, two-bedroom, one-bathroom apartments will be the most popular configuration for future potential buyers.”
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She said that detached houses will remain highly demanded in 2026, but soaring prices will limit entry into the market for many first home buyers.
On the other side, she said that investors will target detached houses with four to five or more bedrooms, which offer higher yields and soaring rents.
Mardiasmo said that the demand for numerous bedroom houses will also lead to a surge in multi-generational houses.
“Multi-generational houses are also becoming more popular due to their ability to keep up to date with changes in individual living standards.”
“Additionally, it combats the rising housing costs as the house will be inherited by the next of kin in the house.”
She said that to attract and cater to multi-generational families, investors will have to target areas with surrounding schools and universities, proximity to medical facilities, public transport, and low crime rates.
Investors to be more cautious
Mardiasmo said that several risks could weaken investor confidence in 2026, including potential increases in interest rates and slow or plateauing economic growth.
She said that tighter lending conditions and serviceability constraints may limit borrowing capacity, making home loans and repayments harder to manage.
Additionally, Mardiasmo said that possible changes to negative gearing, capital gains tax, rental laws, zoning policies, and infrastructure charges could further pressure returns and confidence.
Similarly, high building costs, ongoing supply chain constraints, and the illiquid nature of real estate may also increase risk and reduce market momentum.
“Investors will have to focus on peace of mind and on underdeveloped areas that have the potential to boom over the next 5-10 years,” she said.
Where is growth forecasted?
According to Mardiasmo, Sydney is expected to see house price growth of 6–8 per cent, with median prices reaching a minimum of $1.7 million, while Brisbane could experience a 7.4 per cent rise, adding around $154,000 to median prices by the end of 2026.
Down south, Melbourne’s median house prices have been projected to grow between 6 and 10 per cent, increasing $65,000–$100,000 or more, potentially pushing the median above $1 million.
In the region, data showed that the Sunshine Coast is projected to grow by 5–7 per cent, the Gold Coast by 10–13 per cent, while Townsville could see a $156,000 increase on its $520,000 median (25–30 per cent)
Similarly, Wollongong is set to surpass $1 million, Newcastle and the Central Coast are expected to rise 6–10 per cent, and Ballarat’s median prices are estimated to climb $154,000.
Geelong is the only area expected to decline slightly, with growth projected between -2 and +1 per cent.
First home buyers to be supported
Mardiasmo said that over the next 12 months, the First Home Buyer scheme will continue to reshape the lower end of the market, lowering barriers to jump on the property ladder but increasing prices overall.
She said that first home buyers will need to find good real estate agents who provide more hands-on guidance to secure the sale.
“First home buyers face anxiety and stress purchasing their first home, and want to be provided all the information they need to consider before buying or taking advantage of government and state incentive programs,” she concluded.