Regular readers would know I’m a big fan of property research group SQM Research and, in particular, Louis Christopher’s annual Housing Boom and Bust Report. I reckon it is one of the best property research reports of the year.
So, when SQM Research issue a downgrade to their annual report just three months into the new year, I take notice.
What’s changed?
SQM Research has revised its 2026 dwelling price forecasts downward, reflecting heightened risks from persistent energy shocks, reaccelerating inflation, and the possibility of further RBA rate hikes.
Under the updated base case – assuming the cash rate rises to 4.35 per cent by mid-2026 and annual CPI peaks at 4.4-5 per cent for the June quarter – weighted capital city property prices are now expected to rise by just 0 to 3 per cent. That’s a significant downgrade from the November projection of 6-10 per cent increase.
The revisions take into account escalating Middle East tensions disrupting oil supplies -Brent crude is already above US$92 per barrel, with the potential to reach US$150. This could intensify cost-of-living pressures, dampen buyer sentiment, and prompt tighter monetary policy.
2026 property horoscope
While Perth and Darwin retain strong outlooks (+10-13 per cent and +12-16 per cent,
respectively) due to resource-driven demand, major eastern capitals like Sydney (-6 to -2 per cent) and Melbourne (-4 to -1 per cent) will experience a fall in property values because of higher borrowing costs and subdued migration.
According to SQM Research, the situation could worsen if the cash rate rises above 4.5 per cent by year’s end and the CPI exceeds 5.5 per cent by September. In that scenario, capital city property values could decline further, averaging between –3 per cent and +1 per cent.
Conversely, if rates peak at 4.1 per cent and then ease later in the year, or hold steady at 3.85 per cent, the outlook improves, with modest property growth across the board.
Stay tunned
Whatever happens this year – globally or with interest rates – one thing is certain: Australia’s housing market will feel the impact.
Property is incredibly sensitive to changes in the economy. When borrowing costs move, confidence shifts or global events shake markets, housing tends to respond pretty quickly.
That’s why the revised Housing Boom and Bust Report is worth paying attention to. It takes a close look at the forces shaping the market right now and what they could mean for property prices across the country.
And right now, those forces are pretty influential.
