ResidentialLindsay SaundersMon 15 Jun 26
ANZ Reverses Home Price Forecasts as Rate Hikes, Policy Changes Bite
Australia’s housing market is in line for its biggest reset in years as the ANZ dramatically downgrades its outlook and says capital city home values will fall over the next two years.
In a sharp reversal from previous expectations of continued growth, the bank now expects capital city housing prices to decline 2.1 per cent in 2026 and a further 3.3 per cent in 2027, citing a combination of higher interest rates, geopolitical instability and changes to investor taxation settings.
The ANZ had anticipated prices would rise 2.8 per cent this year and 2.1 per cent next year.
Sydney and Melbourne are expected to bear the brunt of the downturn.
The ANZ forecasts Sydney prices will fall 8.4 per cent in 2026, followed by another 2.9 per cent decline in 2027.
Melbourne is projected to record a 7.7 per cent fall this year and a further 2.3 per cent drop next year.
The bank said the housing slowdown had accelerated as 75 basis points of Reserve Bank interest rate increases collided with escalating conflict in the Middle East and recent Federal Budget changes affecting property investors.
Auction clearance rates have now fallen below 50 per cent, a level historically associated with significant housing market weakness.
Changes to negative gearing and the capital gains tax discount appear to be having an outsized impact on sentiment, particularly among investors.
ANZ Research’s capital city housing price forecasts, annual growth
ANZ expects one and two-bedroom apartments, which have traditionally attracted investor demand, to underperform over the next two years. Owner-occupied detached housing is expected to prove more resilient.
The slowdown is spreading beyond the two largest capitals.
While Brisbane, Perth, Adelaide and Darwin have delivered strong gains in the first half of 2026, ANZ expects conditions to deteriorate in the second half of the year and into 2027. Adelaide is forecast to record the sharpest correction among the smaller capitals next year, with prices falling 6.4 per cent.
Hobart, which has remained relatively resilient so far this year, is also expected to move into negative territory in 2027.
The softer housing outlook is expected to flow through to lending activity.
ANZ forecasts housing credit growth will almost halve, easing from 7.1 per cent in early 2026 to just 2.9 per cent by early 2028 as investor borrowing retreats.
Investor credit growth is expected to turn negative, falling from a peak of 10.4 per cent to minus 0.8 per cent over the same period.
Despite the downturn, ANZ does not expect a prolonged slump.
Ongoing housing undersupply, constrained construction capacity and anticipated Reserve Bank rate cuts in late 2027 are expected to support a recovery, with capital city prices forecast to rebound by 3.8 per cent in 2028.
