Banks Split on 2026 House Price Forecasts

Three RBA rate hikes in 2026 have pushed the cash rate to 4.35%, and yet Australia's four major banks cannot agree on what happens to home prices next. After the May 5 decision, all four banks revised their housing forecasts - and arrived at very different conclusions. For first home buyers trying to decide whether to act now or wait, the gap between the most pessimistic and most optimistic forecasts is larger than it has been in years. Understanding why the banks disagree is more useful than picking a winner.

What each major bank is forecasting for 2026

The starkest divergence is in Sydney. ANZ forecasts Sydney home prices will fall around 0.7% through 2026, while Westpac expects a rise of around 3%. CBA sits closer to Westpac, forecasting modest positive growth, while NAB leans toward flat-to-slightly-negative territory. That is a spread of roughly 3.7 percentage points on a single city - unusual for major bank forecasts in a normal environment.

Melbourne tells a similar story. Most forecasters expect a small decline or flat performance through 2026, with a potential stabilisation into 2027 as the rate cycle turns.

The picture in mid-sized capitals is more consistent, even if the magnitude differs:

• Brisbane: growth is expected to continue but slow significantly - Westpac forecasts around 7%, down from 14.5% last year.
• Adelaide: forecasts cluster between roughly 5% and 9%, with CBA the most optimistic and NAB the most conservative.
• Perth: broad agreement on continued growth, though the pace is expected to ease from the 24.3% annual gain recorded in the 12 months to March 2026.

Why the forecasters disagree

The split comes down to two unresolved questions: how many more rate hikes will the RBA deliver, and how well buyers can absorb higher borrowing costs.

Westpac is the outlier on rates. Where ANZ, CBA and NAB expect the May hike to 4.35% to be the last for 2026, Westpac forecasts further increases at the June and August meetings, potentially pushing the cash rate to 4.85% - its highest level since 2008. Yet Westpac also believes underlying demand in Sydney will hold prices up despite those additional costs.

The RBA itself added to the uncertainty after May 5, leaving the door open to further action by warning of possible "second-round effects" on inflation driven in part by higher global fuel costs. That ambiguity is precisely why professional forecasters are so far apart right now.

Supply is a second factor. New dwelling approvals remain near decade lows, and construction costs and labour shortages continue to constrain completions. Banks that weight supply constraints heavily tend to be less bearish on prices even when affordability is stretched.

How first home buyers should think about the disagreement

A wide spread in forecasts does not mean nobody knows what they are doing - it reflects genuine uncertainty at a turning point in the rate cycle. Here is a practical way to think through it.

Market timing is difficult even for professionals. The 3.7 percentage point spread on Sydney prices shows how hard it is to call the market right now. Waiting for "the bottom" means waiting for a signal that may arrive late or look clear only in hindsight.

Your city matters more than the national headline. If you are buying in Adelaide, Brisbane or Perth, most forecasters expect prices to keep rising in 2026. If you are looking in Sydney or Melbourne, more caution is reasonable - but government schemes that reduce your deposit requirement and avoid LMI can reduce the capital at risk if prices dip further.

Scheme eligibility windows are real. The First Home Guarantee's price caps, state-based grants, and stamp duty concessions do not automatically adjust to market conditions. A scheme saving worth tens of thousands of dollars may more than offset a modest price movement in either direction.

Stress-test for the full range. If Westpac is right and the cash rate reaches 4.85%, monthly repayments on a typical loan will be noticeably higher than they are today. Running your numbers against that scenario - before you commit - is more useful than betting on one bank's forecast.

• Consider your own financial stability, not just the market direction: secure employment, a stable income, and a deposit that keeps your LVR manageable are more durable foundations than any price forecast.
• Talk to a mortgage professional about how your specific income, debts and savings interact with current serviceability buffers - lenders assess at rates well above the current cash rate regardless of which bank forecast turns out to be correct.
• Review your scheme options now. With 7,700+ First Home Guarantee places still available as at May 1, and Help to Buy expanding under the upcoming federal budget, buyers who meet the criteria have more support than they may realise.

Run the numbers

When professional forecasters disagree this widely, running your own numbers across a range of scenarios is the most useful thing you can do. These tools cover the key variables:

• Interest Rate Shock Tester - model your repayments at 4.35%, 4.60% and 4.85% so you can stress test against both the hold and further-hike scenarios.
• Borrowing Power Calculator - see how your maximum loan changes at each rate level, and how much buffer you have if rates rise from here.
• Scheme Comparison Tool - compare the First Home Guarantee, Help to Buy, and other federal schemes side by side to see which suits your deposit and income.
• Grant Stacker - layer state grants and stamp duty concessions on top of scheme savings to see your total potential benefit, regardless of which way prices move.