Official Cash Rate
In June 2026, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.35%, marking the first hold decision of the year. The decision reflected the RBA’s ongoing concerns regarding persistent inflationary pressures and the continued resilience of domestic economic conditions.
Three of the major banks expect the cash rate to remain at 4.35% for an extended period, assuming a partial reopening of the Strait of Hormuz and a corresponding stabilisation in global energy markets. However, further disruptions to oil supply, whether through ongoing restrictions in the Strait of Hormuz or escalating attacks on vessels transiting the Red Sea, could place additional upward pressure on inflation and increase the likelihood of further rate hikes.
Notwithstanding these risks, the major banks have recently brought forward their expectations for monetary easing, with cash rate cuts now forecast to commence in Q3 2027, compared with previous forecasts that anticipated rate relief in 2028.
Inflation – Consumer Price Index
The Australian Bureau of Statistics (ABS) reported that CPI rose 3.8% in the 12 months to June 2026, down from 4.0% in the 12 months to May 2026. The largest contributors to annual inflation were Housing (+6.8%), Food and non-alcoholic beverages (+3.3%) and Recreation and culture (+3.3%). For the month of June alone, the CPI fell 0.1% in original and seasonally adjusted terms. Trimmed mean inflation was 3.6%, unchanged from 3.6% in the 12 months to May 2026.
In response to the data, the RBA maintained a cautious stance on inflation, a position that ultimately provided further indication for the decision to increase the cash rate in May 2026.
Population
As of December 2025, Australia’s population was estimated at approximately 27.8 million people, having increased by around 1.5% year-on-year. Population growth continued to be driven primarily by net overseas migration, which remained the largest contributor to population growth, supplemented by a positive natural increase.
New South Wales remained Australia’s most populous state with approximately 8.7 million residents, followed by Victoria (approximately 7.2 million) and Queensland (approximately 5.8 million). Western Australia continued to record the strongest population growth rate nationally at approximately 2.2%, with Victoria and Queensland also posting above-average population growth.
Australia’s strong population growth continues to underpin housing demand, placing upward pressure on both dwelling values and rental markets. Ongoing population expansion is also supporting demand across residential, commercial and infrastructure sectors, which is expected to sustain activity in real estate development, construction and private credit markets.
Employment
As of June 2026, Australia’s labour market remained relatively stable, with the unemployment rate at 4.4%, and total employment rising to 14.81 million. The employment-to-population ratio increased to 64.0%, while the labour force participation rate rose to 67.0%, indicating ongoing stable engagement in the workforce. On a seasonable basis, the unemployment rate also remained at 4.4%, and total monthly hours worked increased to 2,014 million, indicating the easing of spare capacity in the labour market.
At a state level, New South Wales recorded an unemployment rate of 4.0%, below the national average of 4.4%, whilst Victoria recorded the highest unemployment rate across the country at 5.1%. New South Wales recorded a 0.9% monthly increase in employed people, whilst nationally Australia recorded only a 0.5% monthly increase.
Dwelling Approvals
In June 2026, the seasonally adjusted number of dwelling approvals increased 7.2% to 18,328 dwellings. The increase was primarily driven by a 17.8% rise in private sector dwellings excluding houses, which increased to 7,138 dwellings, while approvals for private sector houses rose 0.4% to 10,631 dwellings. In trend terms, total dwelling approvals increased 14.1% year-on-year, with both house and higher-density approvals continuing to trend upward. Private sector houses also recorded their highest annual approval level since 2021-22, contributing to the strongest annual dwelling approval outcome in five years.
The value of residential building approvals increased 15.1% in June 2026 to $11.75 billion, reflecting an 18.0% increase in new residential building approvals. In contrast, the value of non-residential building approvals declined 24.7% to $8.26 billion following a strong result in May.
Median Dwelling Price
As of June 2026, the Australian housing market has experienced a steady downward trajectory as a result of three rate increases throughout the year, Labor’s abolition of tax breaks for investors, rising fuel costs, and geopolitical anxiety over the Iran conflict. National dwelling values fell 0.7% over the quarter, driven by a 1.3% decrease across the combined capital cities and a 1.1% increase in combined regional markets. The fall in dwelling values represents a shift from the 2.1% rise in the previous quarter to March 2026. Both Sydney, Melbourne and Canberra recorded declines in dwelling values at -3.2%, -2.6% and -1.3%, respectively, while all other capital cities recorded increases in dwelling values for the quarter ending June 2026.
Darwin and Perth saw the highest gains in dwelling values for the quarter, recording increases of 5.0% and 2.0%, respectively. Similarly, Regional WA and Regional TAS recorded the highest increases for regional areas at 3.7% and 2.8% for the quarter, respectively.
The total value of Australia’s residential real estate fell to $12.5 trillion to June 2026, comprising 11.5 million dwellings nationally, and $2.6 trillion of outstanding mortgage debt. Constantly increasing land prices continue to influence buyer behaviour to more affordable regions and further away from less affordable metropolitan city centres such as Sydney.
Vacancy Rates
Vacancy rates remained tight through the first half of 2026, with the national vacancy rate holding at 1.6%, below the five-year average of 1.8%. Continued supply constraints have supported rental growth, with total rental listings sitting 16.7% below the five-year average. Vacancy rates remained slightly tighter across the combined capitals (1.6%) than regional Australia (1.8%), highlighting the ongoing imbalance between rental demand and supply nationwide.
House Rental Rates
Australia’s rental market remained under sustained pressure in the June 2026 quarter, with tight vacancy rates supporting acceleration in rental growth across the country. National rent values rose by 1.6% in the quarter, down from the 2.1% increase recorded in Q1 2026. Annual rental growth rose to 5.9% year-on-year in the June quarter, up from 5.7% year-on-year in Q1. The combined capitals and combined regional areas show a similar year-on-year growth at 6.0% and 5.9, respectively. The total rental listings across the country were 16.7% below its five-year average.
Sydney remains the most expensive city, with a median weekly rent of $841/week, representing a median of $883/week for a house, and $783/week for units. This represents a 5.9% year-on-year increase in June 2026, however Darwin recorded the strongest increase in rents rising by 10.1% year-on-year with a median of $725/week, followed by Hobart and Perth where rents rose by 8.6% and 7.8% year-on-year, respectively.
Gross rental yields have gradually started to trend higher in recent months, up to 3.7% in June (from around 3.5% at the end of 2025. Gross yields remain well below the cost of capital, indicating the difficulty to positively gear properties.
Forecasts provided above are representations from the below specified sources as at August 2026, this information is not to be relied upon as financial advice and Zagga makes no representations or warranties to its accuracy. Forecasts are constantly updated and should be independently considered by investors.
Sources – ABS, Cotality, CoreLogic, Domain, SQM, RBA, Westpac, NAB, ANZ and CBA.
For further insights, visit our Market Outlook page and see what our Economist ‘In Residence’, Stephen Koukoulas, has to say.
