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2026 Property Predictions: Why 2025 Property Strategy Won't Work This Year · The Follio Property Podcast

• 0:00
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• 0:56
  Sydney property prices have soared. Melbourne has just recorded its sharpest property price fall. One in five is now selling at a loss.
• 1:05
  Melbourne, you predicted? 5% growth for 2025. 4.8. Perth? 15%. Yeah, 15.9. Darwin was the winner in Australia at 18.9%. Everyone's got a prediction, right? But if you're not tracking it, what's the point? What are the biggest risks in Australian property in 2026? So if we go back to 2019, there was 14,000 to 15,000 properties on the market. So now to be at 1,800, less than half of where we were.
• 1:30
  This is what really frustrates me, Reece. The banks make all these wild predictions and they get every time they're wrong. But the ceiling of Brisbane is going to come and it's going to come quickly. So I could see at some point in time that you almost see like a handbrake effect in that market once it hits that affordability ceiling. Adelaide is now the most unaffordable market that I think will see falter first. We could see stagnation, if not negative growth, in 2026 for the Adelaide market.
• 1:57
  You're listening to the Folio Property Podcast. I'm Rhys Beddle and I'm here each week with my co-host, Lachlan Delahunty. Lachlan, welcome to 2026. Thanks, Rhys. It's a new year and it's going to be a big year. It's going to be a big year. A really big year. I'm not going to plug any subscribing or liking. I've been doing that to death the last couple of episodes, but I appreciate all the support. We did do a competition at the back end of last year, kind of off the cuff. I don't know if you realize what you're getting yourself into.
• 2:25
  Yeah, you filled out my diary, which I appreciate. We sent it out, sent out the bat signal to anyone that wanted Lachlan to do a portfolio review. We're actually inundated with inquiries. I was pretty shocked to see how many came through. Well, thanks, mate. So you're surprised that people want my opinion on their portfolio. We did pick three, though. And what we did is I didn't want people to think we were just choosing sophisticated investors to give to Lachlan. So we actually chose a first-time investor. So on the inquiry form was how many properties do you own, zero, one, or two plus. Yep.
• 2:54
  We picked one out of each category. So that way, you know, depending on, it'd be good to get a bit of feedback on that as well, see how that went. Colin, Evan and Xavier from Sydney and Perth. Look forward to catching up with you guys and that will be over the next three or four weeks. So good timing because it's start of the year. So it's always a good time to reset and see where your portfolio's at. So I look forward to meeting with those people.
• 3:15
  Absolutely. Once we do those, we'll figure out if we run that again in the next three to six months. It is hard getting stuff in your diary. Give me a chance. But no, I look forward to it. It's great. And it's good to support the people that are supporting the podcast. Absolutely. We're going to go into each capital city, go through a review of how it performed last year, some of your predictions that you had on some of the markets.
• 3:34
  Get your predictions for 2026. We're going to hold you accountable to these. And what I think would be really relevant now we've got a bit of a community building with the podcast is put your comments with your predictions on what you think each market's going to do in 2026.
• 3:49
  It'll be interesting to hear what our community thinks. Let's get them together. We'll collate them, we'll put them in the vault, and we'll review them at the end of the year or potentially at the end of the quarter. What does 2026 look like in your mind? And it's important as a community we can share our thoughts. So please drop a comment. It'll be interesting to hear your thoughts compared to what I put forward today.
• 4:08
  Yeah, maybe we offer a prize to whoever gets their predictions correct. Maybe it's a portfolio review. You'd take them out for dinner. All right, let's kick us up. Melbourne, you predicted 5% growth for 2025. 5% growth, 4.8. Okay, you're not going to hate me for that. That's pretty well close to the money. Very close. I said north of 5%, I believe, but 5% was a benchmark. So put a cross next to that because I did say north of 5%. It's done 4.8. Shining light, though, every month since Feb was an increase.
• 4:37
  It was, yep. It was a really slow start, slower than we anticipated, but I'd put that down. Yeah, we got that one wrong. Yep. Perth, what did you predict on Perth? 15%.
• 4:46
  Yeah, 15.9. We go. Carry the .9 over to Melbourne. It's not good enough. But no, it wasn't surprising. And I was speaking to people that said I wouldn't surprise if it did, you know, very confident it was going to do double-digit growth. Wouldn't be surprised if it did 20. But I remember that the podcast with Trent Feskins, you know, he wanted a figure and I gave him 15%. And I think, you know, we're never going to get it absolutely right. But it was clear that the market was going to go through a really significant growth phase, which it did.
• 5:13
  Yeah, I mean, Mr Albanese helped you with that one because Q4, 48% of the growth in Perth happened in Q4. I think most markets around Australia, Q4 was the strongest threat. That was no surprise. Yeah, post that. Another one as well, we had a prediction, I think it was September, October's episode on a Perth market update.
• 5:31
  You said we'd get below 2,000 listings in Perth. Yeah, which is a big call. The precedent prior to 2025 was 3,500 listings. So to say that we'll get below 2,000 was a bold prediction. And we're sitting at 1,888 listings here. In the second week of January, we're sitting well below 2,000 listings. So it is interesting times in Perth for that to occur. I think last year was about 4,500, to give you context, which was an extremely low listing environment. So we're...
• 6:01
  significantly below that, which will mean for Perth, it's going to fire from the get-go. I think you'll see big results in January, February because there's nothing available. Do you take that data with a pinch of salt? Like I see a lot of my social media, look, I do it myself, I'm not talking shit about these people, but I see a lot of my social media people talking about the listings, all-time low, da-da-da-da. Over that Christmas period, surely no one's putting their house on them.
• 6:27
  No, they're not. So to say that period is, you know, that's why I made the prediction we'll get below 2,000 because from essentially December 10 to 15, no agents start listing. They push them all back. Really, most agents will hold off until post-Australia Day weekend. But there'll be an argument that suggests it's a good time to sell at the moment because there isn't a lot of listings. So why would you want to compete?
• 6:48
  But what I start to compare is years gone by. If we go back to 2019, at this same time, there was 14,000 to 15,000 properties on the market that you could purchase. Fast track to the end of 2024, there was 4,500 properties at the same period. So let's go back in years gone by and compare it to that point. So now to be at 1800, less than half of where we were at an already previously record low listing environment.
• 7:16
  It means the year's going to start arguably stronger than it finished, which will be probably sad for a lot of listeners trying to get into the market in this first quarter. It's going to be really, really competitive. I want to do a summary, quick summary of major capital cities. Yep. Have a couple of anecdotes on a couple of the regional plays or –
• 7:34
  plays that are similar to a regional play. But then I really want to delve into your 2026 predictions. Yep. So we're looking at interest rates, we're looking at debt levels, we're looking at leverage, we're looking at the first 5% first homeowner scheme. And obviously around the ground, state by state, city by city, forecast growth predictions are up.
• 7:56
  Let's go to Sydney. Annual growth, 5.8%. Q4, actually one of the softest markets in the country at 0.8% for the quarter. And there's a lot of commentary now that that market's now starting to soften, I'm assuming from an affordability standpoint.
• 8:10
  It really is. It's above its historical high levels and affordability. Sydney's one of those beasts that you're a bold man to predict because you say it's going to go down, it goes up, and you think it's going to go up and it stagnates. But history will tell us the last 20 years, Sydney does debunk most trends. But if I look purely at the data, and as we said off air, Sydney historically is very sensitive to interest rates.
• 8:34
  We're probably going to get into this, but forecasting at least two rate rises this year, particularly in the first quarter, maybe the first two, I think we're going to see a really slow start to the Sydney market this year and potentially carry through the year. So I wouldn't be surprised if we see very stagnant growth. I don't think it's going to fall, but I think we will see sub 5% for 2026, and it could be closer to zero than it is five.
• 8:56
  And we speak about the affordability index that we track, which is your medium household salary versus your medium household mortgage repayment. And Sydney's above its ceiling already. It has been, yep. So it's at its peak. Yeah, well and truly it's 10% above its ceiling, Rhys. So it's never been this unaffordable. Yep. And then it's only going to become more unaffordable once you see one or two interest rate rises.
• 9:19
  So for those that need debt, and that's where Sydney market's a little bit unique because there's a lot of generational wealth that buys property in Sydney. So it's not always reflective to those measures, but certainly for the average punter and the person, the average mum and dad taking on debt, it's going to be very, very difficult to see that market increasing in value over the course of the year. Okay. So 5.8% did last year, it's going to be less. Do this. Yep.
• 9:44
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• 10:13
  Okay. Let's move to Melbourne. Melbourne, similar to Sydney from a growth perspective in Q4, was actually only 0.8. But as we mentioned previously in the podcast with your prediction and where you landed, it did have incremental growth throughout the year. So it is starting to have some green shoots there. Yields are an interesting play in Melbourne, though. It's an area we're pretty familiar with as a business.
• 10:36
  But they've actually on average now got stronger yields than Brisbane and Adelaide. It's crazy, right? Historically, Melbourne has the worst yields in the country and now you can buy an investment property in Melbourne on a higher rental return than you can in Brisbane and Adelaide. I've just repeated exactly what you said.
• 10:53
  Anyway, it's pushing Perth too, so I wouldn't be surprised if it's getting that way. And the big thing we speak about on the podcast is you look at this and it's done 4.8% for the year, but then you look at an area of Frankston, which we've been acquiring properties within that area, that did over 15% growth in Perth.
• 11:11
  There's high saturation investors, which we don't like, Rhys, but certainly we will benefit from the uplift of those other investment advisory firms buying in similar areas. But always, like I said, we're trying to buy with the appeal to take back to the market at some point in time to an own occupier. Yeah.
• 11:29
  You're right. Melbourne performed, you know, comparable to what we expected into 2026. Melbourne will outperform what it did in 2025. I'm expecting somewhere between 5% and 10%. You know, I think a great outcome for Melbourne will be double-digit growth, but I'm not backing that. I think we'll get back to its long-term historical growth average, which is about 6.5%.
• 11:52
  And that's a strong performing market. So forecast for Melbourne into 2026 this year is close or around about its long-term historical growth average of 6.5%. And forecast is Melbourne will outperform Sydney. Melbourne will outperform Sydney, yes.
• 12:08
  Okay. Let's move on to Brisbane. 14.5% growth for the year. And Brisbane's been running hot now for a decade. We don't have the charts in front of us, but if you look at the median house price from Brisbane from essentially going back to 2014, it's been on an upwards trajectory ever since. And we're now seeing assets that we've purchased for clients years gone by that have done now 150, 160% race. So-
• 12:32
  Start to get nervous about Brisbane purely because the affordability, it's getting very close, if not already, once the latest figures come out at its historical affordability ceiling. People talk about we've got the Olympics coming there. What does that mean? Infrastructure's strong. I don't disagree with that.
• 12:48
  But there's only, if you throw a couple of rate rises in there, Brisbane, similar to Sydney, is sensitive to rate rises. We saw that in 2024, that there is some sensitivity there. I still think there's so much momentum, similar to that of Perth, where demand simply outweighs supply at scale. I do think in the first quarter Brisbane will continue to run. You're going to want a percentage increase over the year. Forecasting, Brisbane, what did it do? 15%.
• 13:17
  14.5. Did 14.5, but it did 5.6 the last quarter. So it's got the momentum. Yeah, it's got momentum. It is over medium house price over a mil now. Yeah, it is. So it's the second most unaffordable. But it will kickstart the year strong. It'll be similar to that of Perth. Could do up to double-digit growth. Majority of that growth will happen in the first two quarters. But the ceiling of Brisbane is going to come quickly. So I could see at some point in time that you almost see like a handbrake effect in that market once it hits that affordability ceiling.
• 13:44
  Adelaide, 8.8% for the year. However, this was the biggest growth. We've already mentioned the kicker that Q4 had, but out of all the markets, Adelaide had the biggest increase in Q4, so 5.1%. So nearly 60% of their growth happened in the last quarter. Medium house price over 900K now. So that's another market, obviously not in a similar vein to Brisbane, but it's really...
• 14:07
  With the exception of Sydney, Adelaide is now the most unaffordable market in Australia. And I've echoed my concerns about this market late last year. And a lot of that growth that you're talking about is at that first home buyer segment, that's sub 850 mark. But this is the market that I think we'll see falter first in Australia. In the Australian landscape, we could see stagnation, if not negative growth, in 2026 for the Adelaide market.
• 14:36
  What's your prediction then? Less than 3% growth. All that growth will be taken up in the first two quarters. Okay, let's round up with, we're not going to pay as much attention, but not to group them together, but Hobart and Darwin, two plays we'd probably classify as regional. Both did really well. So Hobart 11.3% for the year. Darwin was the winner in Australia at 18.9%.
• 14:58
  No surprise with the amount of investment activity. Like I said, they're considered regional because of the percentage of stock in that market is lower than the other major capital cities, significantly lower. And when you get the wave of investment activity that you're seeing from various buyers, agent firms that target these regionals, they can essentially artificially inflate the markets and we saw that take place. Again, I won't be surprised and I'm probably forecasting that Darwin will be the highest performing market into 2026.
• 15:27
  but I have serious concerns towards the back end of this year of where that market will start to falter as investors come out of that market. Similar to what I've said about the North East Queensland market, we're already starting to see some interesting trends come through in that market. Vacancy rates have started to rise significantly, which is typically the first indicator that a market is starting to come off.
• 15:52
  Yep. And then just for Hobart, look, we're not fully on the ground in terms of this market, but we did catch up with one of the second biggest agents in that area. Yep. And he mentioned 70% of his Q4 sales were to interstate buyers agents. And what do you think that is, Rhys? That's investor activity getting flooded.
• 16:08
  It's investment activity because it's an affordable price point. And that's typically what these firms will do. They'll target the most affordable markets in Australia because Adelaide, because Hobart's been on his knees for so long, it does arguably represent value from an affordability standpoint. But what are the fundamentals of that market? They're not strong. You're seeing negative interstate migration, seeing very slow overseas migration. So the fundamentals of that market aren't strong.
• 16:31
  They may see a sugar hit like Darwin of investment activity that may see 5%, 10%, 20% growth in a short period of time, but the fundamentals aren't there to support that market long-term in my opinion.
• 16:44
  All right, let's talk the big stuff, the predictions or your feedback on where you see the market going with some of the big things nationally. Yeah. First, do you want to give the pecking orders? Summarising all that, Lachlan, let's just do the leaderboard in terms of capital growth. We had Darwin still number one. I think Darwin will. We're not investing there, although we are confident that it will run this year. Darwin one, Perth two, Melbourne three, and then obviously we'll see, I like to think it's Brisbane.
• 17:15
  Sydney and Adelaide will be fighting sort of for bottom of the ladder, so to speak. Okay, good stuff.
• 17:21
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• 17:51
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• 17:57
  Smooth caramel, maybe. Or white chocolate mocha. Whichever you choose, delicious coffee awaits. Find Starbucks Frappuccino drinks wherever you buy your groceries. All right, let's get on to the big stuff. I want to talk through interest rates. Big story of 2025, we saw a decreasing environment, which helped, you know, fairly. Spirited markets, yep. Absolutely. And there was baked in to be one last decrease at the end of last year.
• 18:22
  Inflation data wasn't pretty towards the back end last year. Or early this year, right? Or early this year. So the markets have now changed. It's up to 3.85% inflation, so well above the target range of 2% to 3%.
• 18:34
  So where do you see it going in 2026? It's like this is what really frustrates me, Reece. The banks make all these wild predictions and all the chief economists of the world make these wild predictions and they get every time they're wrong. So we're bold going to make predictions. But inevitably, futures have forecasted a rate rise, likely early, likely in February, to see if they can curb the inflation problem that we have.
• 18:59
  Like I said, I'd be a brave man to call any cutting in 2026. It will be a rising environment. I don't think it'll be any worse than two. I don't think it will be any better than one. So if I was going to keep a range. So worst case scenario, two rate rises. Best case scenario, one.
• 19:15
  what does that mean for the markets? For those markets that are unaffordable, be that Sydney and Adelaide in particular and now sort of Brisbane to a certain extent, they're going to be quite sensitive to that when the lending's tightening up as well, the parameters around lending's tightening up.
• 19:31
  So these markets such as Darwin, they have quite a long runway, still Perth, Melbourne, won't be as susceptible to a rate rise because the market can afford more because the affordability index allows that. Those that are already at their ceiling and are quite sensitive to that, Sydney, Adelaide and Brisbane...
• 19:49
  you'll start to see the pinch on those markets and then we'll see them potentially start to flatten out and potentially stagnate. What about this first-time buyer government scheme, the 5% no LMI? We've already spoken about it. You can clearly see the impact it had in Q4. You've made antidotes that you see most markets having a really strong start. Is that momentum or is that off the back of the first-time owner cap as we start to buy, start to get priced out?
• 20:16
  It's both, right? So momentum's a huge thing. We know that sentiment can drive markets alone. There's so much positive sentiment around it. Everyone's going to be reading these latest figures that come out. The largest amount of growth Australian's seen in the last quarter of 2025, I've got to get in. That starts to create that FOMO phase, so we'll see that take play. Yes, there's still some runway left in the first-own-buy scheme, so that apartment unit villa market will continue to rise. You'll see the land markets start the year extremely strong.
• 20:45
  So all that coming into play and the fact that there is still a national shortage of property is going to mean the year's going to start completely opposite to what it did in 2025. It was a super slow start to 2025. We're going to see it start with a bang.
• 20:59
  And we touched on this in an episode at the back end of 2025, Australian real estate debt all-time high, nearing $12 million. What sort of pressure do you see that impacting the market? Well, we're going to start to see the banks tighten, right? They're overexposed. We're seeing that with the trust lending space, which I'm sure you allude to.
• 21:17
  So I think we're going to see tougher credit environments in 2026, which we're already starting to see. So you overlay that with a rising interest rate, you're going to start taking on debt and getting more debt may prove to come a little bit more difficult towards the back end of the year, which will have an impact on the markets.
• 21:35
  Yeah. So investor lending is at an all-time high. Yep. At a high since its peak in 2017 where they had some strict restrictions on investor lending activity. So it starts the app, makes some moves. We've sort of seen bits and pieces of that in 2025 because we're going to see such a strong start to 2026. I think you'll see something big coming somewhere in the middle of the year, Q2, Q3. We're going to see some more regulation around the lending because it's getting to, I hate the word, but it's unprecedented levels.
• 22:04
  When that happens, you typically see APRA or the like coming to start to slow down some momentum. We saw that in 2017. Yeah, and what sort of things were they doing? Well, they got rid of interest-only investment lending, which was massive to the markets. I don't necessarily see that coming to full effect, but there could be something, a version of that to really slow down this investment market. We've seen banks pulling out trust lending. It will be targeting investors.
• 22:32
  Lachlan, what are the biggest risks in Australian property in 2026? Getting caught up in the FOMO phase. I spoke about it earlier in the podcast about sentiment driving markets. It's going to be very hard for individuals to not keep, when you've had a really good two, three, four, five years, to not go back to the well and take on more debt because it seems extremely easy. Everyone in Australia, with the exception of Sydney and arguably Melbourne to an extent,
• 22:59
  Everyone's an expert. Everyone's made money and everyone thinks it's extremely easy. It's just a game of debt, take on more debt. So I think that's the biggest risk, not getting caught up in FOMO and going down the regional, and Darwin's included in that, going down to speculative, historically speculative asset classes and areas. That's my biggest risk in the market. And what's the biggest opportunity in 2026? The biggest opportunity I think is consolidating.
• 23:26
  checking in on your portfolio, understanding exactly where it's at, and potentially using some of those speculative gains to either pay off debt, reallocate those assets into better quality, better areas. That's a thing. Regionals always have a place, or speculative average can have a place as a stepping stone asset. Maybe 2026 is the time to reconsider divesting those assets and upgrading them into better quality and more long-term hold assets would be my advice. Yeah.
• 23:55
  Beautiful. You've been listening to the Folio Property Podcast.