Why Australian Property Prices Keep Rising

What CBA's Latest Forecasts Actually Mean

Commonwealth Bank economists recently released updated housing price forecasts using two different economic models. Their findings were striking.

The Reserve Bank of Australia's rate decisions, not government housing policy, are the most powerful lever on property prices in the short term:

• Without the recent rate hikes, house prices were forecast to grow at around 5% in 2027. That forecast has now been revised down to closer to 3%.
• A potential third rate hike in August could push national price growth even lower, to around 2%.
• By comparison, proposed changes to capital gains tax and negative gearing are expected to reduce annual price growth by less than 1% in 2027.
  
  

The policy debates dominating headlines are having roughly half the impact of what the RBA does with the cash rate.

CBA also flagged that the supply-demand gap (the core structural driver of Australia's housing shortage) isn't expected to close until the end of 2027. That's meaningful for renters, but it's also meaningful for investors holding assets through that period.

The Supply Shortfall Is Worse Than the Targets Suggested

Over the first 15 months of the National Housing Accord, ABS quarterly dwelling completion data showed that approximately 81,000 fewer homes were constructed than required, which is  around 27% below target.

The shortfall by state paints a stark picture:

• New South Wales: approximately 32,000 homes short
• Queensland: approximately 15,000 homes short
• South Australia: approximately 4,000 homes short
• Western Australia: approximately 3,000 homes short

Australia was already behind. The combination of rate pressure reducing developer confidence and ongoing construction cost challenges means that supply catching up to demand remains a distant prospect for most capital city and high-growth regional markets.

For investors, chronic undersupply is one of the most reliable long-term drivers an asset class can have.

Consumer Sentiment Is Flashing a Warning Signal

Here's what makes the current market particularly interesting from an investor's perspective.

According to the latest Westpac–Melbourne Institute consumer sentiment survey, expectations for house price growth have hit their highest level in 15 years. Yet the proportion of people who think now is a good time to buy has actually fallen.

This split matters. When buyer confidence is low but price expectations are high, it typically reflects a market where:

• Potential buyers are hesitating due to affordability concerns or economic uncertainty
• Prices are still being supported by tight supply and genuine demand
• The competitive pressure investors fear is not yet present

Historically in Australia, periods where price expectations rise while buying sentiment drops have preceded further price growth, not market corrections. The fear and the opportunity are often the same moment.

Brisbane and Perth Are Still in Front

CBA's modelling identifies Brisbane and Perth as the two cities expected to continue outperforming in the near term, supported by tight supply-demand dynamics and economic momentum.

Current forecasts suggest:

• Perth: potential growth of around 15% in 2026, slowing to approximately 4% in 2027
• Brisbane: potential growth of around 12% in 2026, slowing to approximately 4% in 2027

The slowdown in growth rates by 2027 is largely attributed to rising borrowing costs and affordability constraints catching up, not demand collapsing. Both cities remain underpinned by strong population growth, infrastructure investment, and continued interstate migration.

The Strategy: Widen the Search

For investors sitting on the fence, the key insight from the current data isn't that property is unaffordable, it's that entry points still exist in markets most people haven't considered yet.

There are still opportunities to purchase:

• In the $500,000–$550,000 price range across various markets
• In townhouses and quality units, not just freestanding houses
• In locations with strong underlying growth drivers that may be outside the well-known suburbs

One of the most important lessons for new and emerging investors is that blue-chip by perception and blue-chip by performance are often different things. Some of the strongest long-term performers are areas that weren't on most investors' radar until the data showed otherwise.

The question isn't whether the market is too expensive to enter. The question is whether you're looking in the right places.

The Cost of Waiting

Australia's housing market has a 50-year track record of moving higher through rate cycles, recessions, and global shocks. Investors who have held quality assets through uncertainty have consistently come out ahead.

The data right now shows:

• A structural undersupply that will take years to close
• Rate cuts that will add further fuel to demand
• Consumer price expectations at a 15-year high
• Cities like Brisbane and Perth with momentum

Waiting for certainty has historically been one of the most expensive decisions an Australian property investor can make.

Ready to Build Your Property Portfolio With Confidence?

At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our team has helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.

Book a  FREE Investment Assessment Call with Search Property. We'll review your current position, discuss your goals, and help you identify the right markets and properties to move forward with confidence.

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