It was a strong start to 2026 for Australian property, with prices rising across the board and buyer demand continuing to overwhelm low supply. 

But poor affordability remains a widespread concern, and sticky inflation has now triggered an unwelcome interest rate hike from the Reserve Bank, causing consumer confidence to take a hit.

Find out how the various market forces are playing out in this month's market update.

Australian property prices: January 2026

The national median property value continued to rise by another +0.8 per cent in January to sit comfortably above $910,000, according to Cotality's latest report. 

It brings annual gains for the country up to +9.4 per cent.

After a slight dip in December, Sydney and Melbourne both moved back into positive territory with bumps of +0.2 per cent and +0.1 per cent respectively over the month. 

Brisbane charged on with a +1.6 per cent lift, Adelaide continued its steadier ascent with +1.2 per cent, and Perth reaccelerated, delivering January's highest growth of +2.0 per cent. 

Hobart and Canberra's slow and steady recovery resumed, both nontching up reasonable gains, while Darwin maintained a very strong trajectory, adding +1.5 per cent. 

Regional markets once again broadly outperformed their capital city counterparts, led by particularly strong results in regional SA and WA. 

Cotality's research director Tim Lawless said "Despite the most unaffordable conditions on record in many cities, along with a rebound in cost of living pressures and prospect of a rate hike…we are still seeing a broad-based rise in housing values."

The two-speed market conditions remain clear, though, with the mid-sized capitals, Darwin, and regional areas considerably outperforming Sydney, Melbourne, Hobart and Canberra.

Three key takeaways from the current market

A number of property trends have become more firmly entrenched, while other shifts are now just emerging as 2026 begins. Here are the headline issues worth tracking. 

Lower-end house values lead the national charge

While the broader market momentum is holding relatively steady, the lower end of the value spectrum continues to drive national growth figures. 

Across the combined capital cities, house values in the lower quartile (meaning homes priced in the bottom 25 per cent) surged by 1.3 per cent in January, significantly outpacing the 0.3 per cent rise seen in the upper quartile. 

Mr Lawless noted that this divergence is still being fueled by a concentration of buyer demand thanks to worsening affordability and the availability to buy with a 5 per cent deposit under certain price thresholds. 

 "This trend of stronger growth conditions at lower price points is supported by intense competition for more affordable houses," he explained. 

"This is where first home buyers, investors and, progressively, mainstream demand is most concentrated."

Supply shortages continue to put upward pressure on prices

A persistent lack of advertised stock is providing a floor for home values, even as demand-side headwinds become more evident. 

In January, the number of homes advertised for sale was 19 per cent lower than the same time last year and a significant 25 per cent below the five-year average for this period. 

This scarcity of established supply is a key driver for prices, as listings would likely need to rise considerably before supply exceeds underlying demand.

PropTrack's Angus Moore pointed out rising construction approvals over recent months, however these figures are still around 20 per cent below what would be required to meet the National Cabinet's goal of building 1.2 million homes over five years to remedy Australia's ongoing housing shortage. 

While the numbers are at least trending in the right direction, it looks as though demand will continue to outstrip supply for some time to come.

Rental market sees strongest monthly jump since April 2025

The latest rental market data has given more bad news to tenants and good news to investors.

For investors, the rental market showed renewed vigour in early 2026, with the national Rental Index rising 0.6 per cent in January — the strongest monthly increase in nine months. 

While the national vacancy rate edged up to 1.7 per cent from its recent record low of 1.5 per cent, providing some slight relief for tenants, it remains well below the long-run average of 2.5 per cent. 

Despite gross rental yields softening modestly to 3.56 per cent, investor activity remains high, accounting for a large portion of demand as buyers prioritise long-term gains over immediate cashflow.

"Low yields haven’t been a deterrent to investors, with mortgage activity from this segment comprising 41 per cent of demand based on ABS data to September,” Mr Lawless said. 

"Investors have their eye on opportunities for capital gain, so it will be interesting to see if investor demand tapers if value growth continues to ease."

What's next for Australian property?

The headline news for February so far has been the RBA's decision to increase interest rates, a move that's been widely expected but comes as a disappointment to many nonetheless. 

Cotality's report, released just prior to the RBA's meeting on Tuesday, said "the expectation of higher rates is likely to erode confidence, while any actual increase will flow through quickly to borrowing costs and less purchasing power."

Forecasters like Westpac had suggested that this rate hike would likely be a "one-and-done" situation, meaning the new limitations for buyers shouldn't be too substantial, however the developing consensus is now that rates may need to be lifted further if inflation doesn't respond in the way the RBA hopes. 

On the other hand, Cotality pointed to a number of ongoing tailwinds for property prices. 

Listings remain uncomfortably low, first home buyers activity is strong thanks to appealing government incentives, tenants continue to be pushed to buy and escape a tight rental market, and the outlook for unemployment and the wider economy is solid. 

The report concluded that "Overall, the year ahead is shaping up to be one of softer, more uneven growth," with the current two-speed market dynamic expected to sustain as 2026 unfolds.