Domain FY2027 forecast: Sydney and Melbourne prices tipped to fall up to 8% while Brisbane, Adelaide and Perth set new records

Domain's FY2027 Forecast Report, released this week, predicts that Sydney and Melbourne house prices will fall by up to 8 per cent over the next 12 months, while Brisbane, Adelaide and Perth are tipped to hit new record highs. For first home buyers, the forecast reshapes the question of timing in a way that has not been this stark since the early pandemic period.

What the Domain FY2027 forecast says city by city

The report covers the financial year from July 2026 to June 2027 and paints a sharply divided picture across the country's capital cities.

• Sydney: House prices forecast to fall between 4 and 8 per cent. The median house price, currently above $1.6 million, is expected to ease meaningfully over the year.
• Melbourne: House prices forecast to fall up to 8 per cent, with the median potentially dipping below $1 million - a level not seen since the pandemic low.
• Canberra: Minor declines expected as the ACT market adjusts to slower public service hiring and higher rates.
• Brisbane: House prices forecast to rise 3 to 7 per cent, with units expected to jump 5 to 9 per cent - enough for Brisbane units to overtake Sydney as Australia's most expensive unit market.
• Adelaide and Perth: Both forecast for new record highs, with Adelaide rising 4 to 8 per cent and Perth 5 to 9 per cent.

Domain identifies a combination of rate hikes, the federal budget's negative gearing changes, global uncertainty, and local demand and supply mismatches as the drivers of this divergence.

Why the gap between cities is widening in 2026

Three consecutive RBA rate increases in February, March and May 2026 pushed the cash rate to 4.35 per cent, adding pressure to borrowing capacity in Sydney and Melbourne where buyers typically take on larger mortgages relative to income. While the RBA held at its June 16 meeting, most major banks now forecast the next move to be a cut - though not until mid-2027 at the earliest.

The 2026 federal budget introduced changes to negative gearing rules that take effect from July 2027. Investors planning ahead are already redirecting interest away from established properties in the larger, more expensive markets and toward new builds or the mid-sized capitals where yields are higher.

Vendor discounting nationally sits at around 3.3 per cent and auction clearance rates have been below 50 per cent - levels not seen since April 2020. In Sydney and Melbourne, buyers are increasingly holding leverage they have not had in years.

Brisbane, Adelaide and Perth tell a different story. Population growth, stronger interstate migration, and a larger gap between entry-level prices and Sydney or Melbourne equivalents continue to draw both owner-occupiers and investors. In Brisbane, units in particular are benefiting from constrained new supply relative to demand from a growing number of renters who cannot afford to buy.

What this means for first home buyers

The FY2027 forecast carries practical implications for anyone actively planning a first home purchase over the next 12 months.

• Melbourne affordability window: A median house price potentially below $1 million would be a meaningful shift. Buyers targeting Melbourne's middle ring suburbs should model what current rates and a modestly lower price point mean for their borrowing position now rather than waiting.
• Sydney entry point: An 8 per cent fall from current levels would reduce the median by roughly $130,000 or more. That is a substantial shift in the deposit gap, though rising interest costs partially offset the benefit.
• Brisbane and Adelaide risk: Buyers targeting these markets for affordability may find that forecasts of 5 to 9 per cent price growth erode the advantage over the next year. Acting sooner could lock in a better entry price, but borrowing capacity at 4.35 per cent is constrained.
• Perth staying strong: Perth has been the standout performer of the cycle. If you are buying there, the forecast suggests the growth window continues, but so does affordability pressure for those not yet in the market.
• Grants and schemes around July 1: Queensland's $30,000 first home owner grant continues past July 1, 2026, after the 2026-27 Queensland Budget kept it for eligible new-home contracts with no end date. Tasmania's stamp duty exemption on homes up to $750,000 ends June 30. Deadlines like these apply regardless of what broader price forecasts say.

Ultimately, the best time to buy depends on your personal financial situation, your target market, and how long you plan to hold. A price forecast is a useful input, not a guarantee. Working with a mortgage professional who understands both your borrowing capacity and the local market conditions you are entering will help you put these numbers in the right context.

Run the numbers

The Domain forecast shifts the affordability landscape depending on where you are buying. Before making any decision, check what you can actually borrow at the current rate and how sensitive your repayments are to further rate changes.

• Borrowing Power Calculator - see how today's 4.35 per cent cash rate affects your maximum borrowing capacity and what a potential rate cut to 3.6 per cent in 2027 would add.
• Interest Rate Shock Tester - model what happens to your repayments if rates move up or down over the coming year, including the scenarios the major banks are forecasting.
• Grant Stacker - calculate every grant, scheme and concession available in your state before the July 1 changes remove several of the largest ones from the table.
• Stamp Duty Calculator - understand the exact upfront cost difference before and after July 1, particularly if you are buying in Queensland, Tasmania or the ACT.