Article written by Matthew Hughes – Managing Director, Capital Property Advisory | PIPA Board Director | QPIA | 2025 PIPA National Property Investment Adviser of the Year
August 2026 | Prepared exclusively for Empire Financial Group clients
Australia’s national Home Value Index fell 0.7% in July 2026 – the largest single-month decline since December 2022. The correction has broadened beyond Sydney and Melbourne into Brisbane (-0.6%) and Adelaide (-0.2%), and upper-quartile properties nationally are down 3.2% over the past three months. The drivers are well understood: three cash rate hikes in 2026 lifting the cash rate to 4.35%, Federal Budget changes to negative gearing and the CGT discount, cost-of-living pressure, and geopolitical uncertainty.
What matters now is not the direction of the headline index, but where the genuine opportunities sit within it.
What KPMG Is Forecasting
KPMG’s August 2026 Residential Property Market Outlook projects a V-shaped path: further correction through 2026, then recovery in 2027. Nationally, house values are forecast to fall 1.1% in 2026 before recovering 3.4% in 2027. Units are expected to outperform, rising 2.2% in 2026 and 3.7% in 2027.
The city-by-city picture is more nuanced than the national headline suggests. Sydney, Melbourne, and Canberra are the only capitals where KPMG forecasts negative house price growth in 2026. Every other capital – Brisbane (+4.6%), Adelaide (+5.3%), Perth (+6.4%), Hobart (+4.8%), and Darwin (+8.2%) – is forecast to record positive house price growth this year and next. The table below tells the full story.
KPMG’s model assumes one further 25bp rate rise in December 2026 (cash rate to 4.60%), then a cut in June 2027. If the RBA holds or cuts earlier, the recovery timeline likely accelerates.
Melbourne: The Counter-Cyclical Case
Melbourne’s median house price sits at approximately $808,000 – the only major capital below $900,000 – trading at a 56.5% discount to Sydney’s $1,265,608 median. Historically, the two cities traded within 10-15% of each other for decades. Today’s gap is a structural anomaly with no modern precedent.
The correction is cyclical and policy-driven, not structural. Vacancy rates are tightening, and Melbourne has quietly overtaken Perth as Australia’s highest-yielding major capital, with gross yields approaching 3.9% versus Perth’s approximately 3.6%. KPMG forecasts a 5.0% decline for Melbourne houses in 2026 before a +3.3% recovery in 2027. For investors with a medium-to-long-term horizon, the question is not whether the Sydney-Melbourne gap closes – history is unambiguous on that – but whether you are positioned to benefit when it does.
Perth: Moderating, Not Reversing
Perth remains the standout market. REIWA’s July 2026 data shows the median house price at $950,000 (up 18.0% year-on-year), with units at $681,000 (up 22.7%). KPMG’s annual growth figure to June 2026 was +19.5% – the strongest of any capital – and their +6.4% forecast for 2026 reflects orderly moderation, not a correction. REIWA expects the median house price to reach $1 million by year-end.
The most important story right now is in the weekly data. After a transaction trough of 632 sales in the week ending 19 July, volumes have recovered strongly over three consecutive weeks: 658, then 753, then 773 – a 22.3% recovery from the low. Simultaneously, the rate of stock accumulation has sharply arrested: for the week ending 9 August, total active listings stood at 6,852 – up just 1.0% from the prior week, the slowest rate of increase since the surge began. Vacant land listings actually fell 5.7%. After months of relentless supply growth, the data is signalling that the listing surge is running out of momentum.
Together, rising transactions and an arrest in listing growth are early evidence that the budget-driven paralysis is beginning to subside. The fear and uncertainty that gripped buyers after the May Budget appears to be fading. If this trend holds, it points to a more optimistic second half of 2026 for Perth than the mid-year data suggested.
Rental conditions remain structurally tight: median weekly house rent $750 (up 9.5%), units $700 (up 7.7%), vacancy approximately 2%, and WA population growth of 2.2% – the strongest of any state – continuing to drive underlying demand. The Budget’s changes to negative gearing and CGT are creating a paradox: policies intended to improve affordability are actively discouraging the private investment that provides 91% of Australia’s rental housing. Perth is a live case study.
The Structural Floor
KPMG forecasts net new dwelling supply of approximately 160,000 dwellings annually across FY26 and FY27 – roughly 30% short of the National Housing Accord target. The national vacancy rate sits at 1.2%, near historic lows. Net overseas migration of 301,000 in the year to December 2025 continues to drive underlying demand. The short-term correction is real. The medium-term structural case is equally real. The investors who understand the difference are the ones who act decisively at the right point in the cycle.
Data sources: Cotality Home Value Index, August 2026; REIWA Perth Property Market Quarterly Update and Weekly Market Snapshots, July-August 2026; KPMG Residential Property Market Outlook, August 2026.
