State of Sydney Report February 2026

Sydney house prices are likely to tread water in 2026 due to a combination of rising interest rates, affordability pressures and low buyer confidence. Some suburbs, though, are likely to outperform the market, as identified by the Shore Financial State of Sydney Report.

The half-yearly Shore Financial State of Sydney Report divides Sydney’s 600-plus suburbs into five quintiles, based on their current median asking price for houses:

● Quintile 1 = Heartland Sydney
● Quintile 2 = Suburban Sydney
● Quintile 3 = Rising Sydney
● Quintile 4 = Professional Sydney
● Quintile 5 = Affluent Sydney

Standout suburbs – Heartland Sydney (quintile 1)

Standout suburbs – Suburban Sydney (quintile 2)

 

Standout suburbs – Rising Sydney (quintile 3)

 

Standout suburbs – Professional Sydney (quintile 4)

 

Standout suburbs – Affluent Sydney (quintile 5)

 

* The median house price growth over the past 12 months is not for the suburb but the ‘SA3 region’ (a technical term the Australian Bureau of Statistics uses to define a cluster of suburbs) in which the suburb is located. SA3s often closely align to local government areas.

Shore Financial CEO Theo Chambers said that while Perth, Brisbane and Darwin were currently experiencing strong momentum, the research underpinning the Shore Financial State of Sydney Report had found that the Sydney housing market was likely to record only minimal growth over the six months to August.

There were four key reasons for this outlook, according to Mr Chambers.

“First, rising interest rates are reducing borrowing capacity. The Reserve Bank of Australia lifted the cash rate in February and has signalled that at least one further increase may occur this year. Higher rates directly reduce how much buyers can borrow, which in turn caps their ability to bid up prices,” he said.

“Second – and this is arguably the most important factor – rising rates are weighing heavily on buyer confidence. The power of sentiment in the property market can sometimes be more impactful than the actual commercial effect of a rate rise. In many cases, a single rate increase may only make a marginal difference to a particular buyer’s borrowing power. But what it does change is psychology.

“When buyers believe rates may rise again, they become less bullish. They are less inclined to stretch themselves or submit aggressive offers, partly because they assume competing buyers will also be more cautious. Speculation about future rate rises is then factored into their commercial decisions, even before those rises occur. That collective pullback in confidence can take heat out of the market quite quickly.

“Third, affordability remains stretched. Sydney prices are already high relative to household incomes, which limits the depth of buyer demand at current price points and reduces the number of participants able to transact without compromising other financial goals.

“Fourth, there has been a modest increase in listings, particularly in the mid-tier to upper-tier housing markets, compared to last year. While supply is not excessive, the slight lift in available stock gives buyers more choice and negotiating power than they had during tighter conditions.”

However, Mr Chambers noted that while city-wide forecasts represented an important data point, Sydney was not one single property market.

“Sydney is made up of scores of distinct local markets, each with its own supply and demand dynamics. While city-wide growth may be muted, certain pockets are positioned to outperform,” he said.

“The 25 suburbs identified in the Shore Financial State of Sydney Report are experiencing above-average buyer pressure, driven by low or declining inventory levels and compressed days on market. These metrics are reliable leading indicators over a six-month horizon, as tightening supply and faster selling conditions typically precede price growth.

“Conversely, suburbs with rising inventory and lengthening selling times are more vulnerable to stagnation or price declines.

“The key takeaway is that while Sydney’s overall market may tread water in the near term, selective opportunities remain for buyers who focus on local fundamentals rather than headline averages.”