Australia’s housing market will be more complex than ever in 2027
Dr Kevin Hoang – Chief Economist & Head of Property Market Forecasting
There have been significant changes to property investment in the past few months, and Domain has recently released their FY2027 Forecast Report which points to a more fragmented Australian housing market over the year to June 2027, where affordability, borrowing capacity, new tax policy and local supply conditions matter more than ever.
What markets are changing?
The key message is that higher-priced and more interest-rate-sensitive markets – particularly Sydney, Melbourne and Canberra – are expected to soften according to Domain.
Battle of the Capitals!
| Sydney Forecast | Melbourne Forecast | Canberra Forecast |
|---|---|---|
| Houses -7% to -3% | Houses -8% to -4% | Houses -4% to 0% |
| Units -3% to 1% | Units -3% to 1% | Units -4% to 0% |
| Combined -3.3% | Combined -4.4% | Combined -2% |
Brisbane, Adelaide and Perth however are forecast to continue growing over the next 12 months despite three interest rate hikes in 2026 alone and the removal of negative gearing from established properties amongst other changes to CGT and the use of SMSF.
| Brisbane Forecast | Adelaide Forecast | Perth Forecast |
|---|---|---|
| Houses 3% to 7% | Houses 4% to 8% | Houses 5% to 9% |
| Units 5% to 9% | Units 4% to 8% | Units 7% to 11% |
| Combined 5.5% | Combined 6% | Combined 6% |
What factors are causing these changes?
- Units are expected to perform better than houses in several markets because affordability constraints are pushing more buyers toward lower-priced housing options.
- The main downside risks are higher mortgage rates, weaker buyer sentiment, tighter borrowing capacity, and the impact of federal housing tax changes on investor demand.
- The main support factors remain population growth, tight rental markets, low housing supply, and relative affordability in the strongest-performing capital cities.
- Domain is not forecasting a uniform national downturn; rather, it expects a two-speed market, with expensive capitals correcting while more affordable, under-supplied markets continue to rise.
“Forecasting property market direction is usually difficult when there are multiple factors at play. However, historically, Domain forecasts have correctly identified the market’s trajectory, even if they haven’t always matched the exact magnitude of growth rates. Domain’s forecasts are in line with our in-house modelling where we looked at the pressure signals of a boom including low vacancy rates, high rental yield, affordability and housing supply across capital cities”, said Dr. Kevin Hoang, Head of Property Market Forecasting and Chief Economist.
Why This Forecast Won’t Alter Our Long-Term Strategy
We have been monitoring forecasts closely. Last month, Richard Sheppard outlined how the Government’s then proposed changes to Negative Gearing and Capital Gains Tax change very little about where the best property investment opportunities lie. It’s also crucial to remember that the Labor Government had previously abolished negative gearing 40 years ago in 1986, only to reinstate this 18 months later due to significant damage to the broader economy.
Rental growth is also likely to accelerate, meaning overall total returns may not change substantially.
We will continue to monitor forecasts closely. At InSynergy, we remain agile and responsive to evolving market conditions and policy dynamics, delivering data-driven strategies to support our clients in building long-term property wealth.
Why Informed Investors Will Continue to Benefit
Change creates opportunities, and the most informed investors will almost always benefit the most over the medium to long term. By knowing which markets are predicted to outperform above others for the next 12 months, you can help create more rental supply to help stabilise housing affordability. Keep seeking evidence-based, data-driven advice and continue learning.
Our clients are currently generating between two and six times more income from their investment portfolios than from their jobs. If yours is not, contact us to understand how you can optimise your wealth.
Next Steps
If you’d like to understand what these changes mean for your personal portfolio or future investment plans, we encourage you to speak with your Property Wealth Planner or book a portfolio review with our team.