Michael Yardney , Founder
Sydney’s housing market recorded a modest bounce back at the start of the year, with home values rising by 0.2% in January. This follow a 0.3% dip in December, signaling a slight recovery in momentum. However, the rebound was not enough to push values to a new peak, leaving the market 0.1% lower than the high point reached in November 2025.
The current growth is highly segmented, with the lower end of the market driving the gains. While the premium sector remains flat or in slight decline, the more affordable segments are seeing intense competition as buyers navigate record-low affordability and high serviceability hurdles.
Sydney Market Performance
With median house values nudging the $1.6 million mark, the gap between the upper and lower quartiles continues to widen in terms of performance.
| Segment | Monthly Change (January) | Performance Trend |
|---|---|---|
| Lower Quartile (Houses) | 1.0% | Boosting overall growth; high competition for affordability. |
| Upper Quartile (Houses) | -0.1% | Premium segment sliding; values softening at the top end. |
| Overall Market | 0.2% | Marginal pickup following the December dip. |
Source: Cotality, February 2026
Affordability and Serviceability Constraints
The primary challenge for the Sydney market remains the extreme deposit hurdle and ongoing mortgage serviceability. Sydney’s median house value is now nudging $1.6 million, making it the most expensive capital city in the country.
The stronger growth in the lower price points (1.0% rise in the lower quartile) reflects where first-home buyers and investors are concentrating their demand. In contrast, the upper quartile house values slid 0.1% lower, suggesting that the top end of the market is more sensitive to the current high-interest-rate environment and stretched borrowing capacities.
Supply Dynamics and Future Outlook
Persistently low inventory remains the most significant tailwind for Sydney’s property prices. Advertised stock levels are tracking significantly below the long-run average, which prevents a more material downturn in values despite the economic headwinds.
| Metric | Status / Figure |
|---|---|
| Advertised Stock (National) | 25% below 5-year average |
| Interest Rates | RBA rose cash rate by 25bps in February |
| Market Sentiment | Fragile due to cost of living and rate uncertainty |
Source: Cotality, February 2026
Housing conditions in Sydney are expected to remain diverse but are likely to lose further momentum. The recent 25 basis point rate hike in February and new APRA lending limits are expected to act as a natural ceiling on price appreciation through the remainder of 2026.
