Westpac has forecast that dwelling prices will increase by 6 per cent this calendar year before a further 8 per cent hike in 2026, thanks in part to the Reserve Bank’s three recent interest rate cuts.

According to Canstar, those increases would see Sydney’s median house price rise by a little more than $154,000 between now and the end of next year, taking it up to about $1.67 million.

“Sydney’s median house price could rise by up to $154,000 by the end of next year if house prices rise in line with Westpac’s dwelling price forecast,” Canstar data insights director Sally Tindall said.

“For those already in the market, that’s welcome news for their equity. For those still saving, the deposit hurdle is likely to get a whole lot steeper, not to mention the difficulty in clearing a bank’s serviceability test.

Six-figure price rises would also hit Melbourne and Perth if Westpac’s forecasts play out, with the Victorian capital joining Brisbane and Sydney in breaking the $1 million median house price barrier.

“Melbourne is shaping up as the comeback city in 2026, with double-digit growth on the cards, according to Westpac,” Tindall said. 

“This could see Melbourne’s median house price go above the million-dollar mark, which for many first home buyers will be a psychological barrier that makes it feel like the goal posts keep moving further away.”

The forecasts for price rises have been driven by easing interest rates, as well as the chronic undersupply and high demand that has been plaguing Australia for years.

However, while the Reserve Bank is expecting to hand down at least one more cut this year, and potentially another in early 2026, ANZ today warned that the cash rate may be left where it currently stands following stronger-than-expected GDP figures this week.

“If evidence of consumer spending momentum continues and weakness does not emerge in the CPI or labour market data, the RBA may assess the cash rate as broadly neutral with no further cuts needed,” the big four bank’s head of Australian economics, Adam Boyton, said.

Tindall said unexpectedly high rates could throw something of a spanner in the housing price works.

“You don’t have to look too far back to see how quickly market expectations can change when conditions do,” she said.

“The danger is, Australians will borrow to the limit, banking on prices continuing to climb. If circumstances change – whether that’s interest rates, job security or the economy – it could leave some households overexposed.

“The more households borrow, the more vulnerable they become to rate rises or shocks to employment.”

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.