Canberra's luxury property sector could face a downturn in early 2026, according to new analysis, while the city's apartment market may finally see an upswing after a stagnant year. The shift is predicted to hinge on anticipated interest rate rises, which would disproportionately affect high-end buyers.
Rate Rises to Reshape Buyer Demand
Eliza Owen, head of research at CoreLogic, explained that the premium end of the housing market is typically more sensitive to changes in financial conditions. "The higher end of the market, especially in houses, could potentially stabilise or even see a bit of a downswing at the start of 2026," Ms Owen said.
She noted that with borrowing capacity expected to tighten, demand could be deferred to the more affordable unit segment. "You could actually see more demand deferred to the unit segment because that's more within people's borrowing capacity," she added.
This comes after the Canberra apartment market experienced little to no growth throughout 2025, largely due to a significant supply of new buildings entering the market.
First Home Buyers Fuel Lower End Growth
In contrast to the luxury segment, the lower end of Canberra's market has shown resilience. Properties eligible for the federal government's 5 per cent deposit scheme, particularly houses priced below $1 million, have seen a noticeable uptick in recent months.
Ms Owen stated this trend was likely to continue, aligning with patterns observed over the past few years. Mathew Tiller, LJ Hooker's group head of research, economics and business intelligence, agreed. He said growing demand from first home buyers and investors was expected to sustain activity in this more affordable bracket into the new year.
Three Canberra Suburbs Poised for Attention
Mr Tiller identified three Canberra suburbs as ones to watch in the coming period, each appealing to different demographics.
Giralang and Denman Prospect are attracting young, growing families seeking more space without a prohibitive price tag. "We're seeing more families looking for space," Mr Tiller said, highlighting the appeal of suburbs with good connectivity, local amenities, schools, and employment hubs.
Conversely, Bonython is tipped for increased investor interest. Its proximity to a major town centre, transport links, and a mix of housing styles, coupled with a low vacancy rate, is drawing renters looking for alternatives to the inner south and north.
Market Stability Expected in Short Term
Despite the forecasted shifts for 2026, Mr Tiller believes the immediate outlook is for stability. He suggests the housing market will likely remain steady for at least the next six months.
Investors are currently comfortable with their budgets, thanks to a period of interest rate holds. "No one's really waiting for interest rates to drop - the interest rates are going to be stable," he said, contrasting the current sentiment with the hesitation that characterised the market a year ago.
He also noted that Canberra continues to attract investors due to its perceived population and economic stability compared to other Australian markets.
