NSW Property Outlook

By Peter Thomas
Senior Origination Manager – NSW
Millbrook Group

Market Commentary

Sydney’s residential property market has entered 2026 in relatively stable condition, underpinned by constrained housing supply, ongoing population growth, and a persistently tight rental market.

Following a softer finish to 2025, dwelling values have largely stabilised and returned to modest growth. However, affordability pressures continue to influence buyer behaviour, resulting in more selective purchasing decisions and longer transaction timeframes.

We are also beginning to see some price softening across premium markets, particularly within the Eastern Suburbs, Northern Beaches, and Lower North Shore, as higher interest rates and affordability constraints impact demand at the upper end of the market.

Rental vacancy rates remain among the lowest in Australia, continuing to place upward pressure on rental values and supporting investor demand.

While government initiatives aimed at assisting first-home buyers have provided some support, their broader market impact remains limited given ongoing cost-of-living pressures and affordability challenges.

Across regional New South Wales, demand remains resilient as buyers continue to seek more affordable housing options and lifestyle opportunities outside metropolitan Sydney.

Significant infrastructure investment, including Sydney Metro West, Western Sydney Airport, and broader transport network upgrades, continues to underpin long-term growth prospects across key development corridors.

At the same time, elevated construction costs, labour shortages, and industry capacity constraints continue to delay project delivery and restrict the supply of new housing stock.

Population Growth

Key population indicators remain supportive of long-term housing demand:

• NSW population has reached approximately 8.6 million people.
• Population growth increased by 1.2% in the year ending June 2025.
• Overseas migration remains the primary driver of growth.
• Affordability pressures continue to drive development and population expansion across Western Sydney growth corridors and regional centres.

Employment

Sydney continues to benefit from a diversified employment base, with key sectors including:

• Professional, Scientific and Technical Services (22%)
• Financial and Insurance Services
• Healthcare and Social Assistance
• Construction
• Education and Training

NSW unemployment increased to 4.5% in April 2026, broadly in line with the national average.

Residential Market Snapshot

Sydney Residential Market

• Median house price: $1.47 million – $1.59 million
• Annual dwelling value growth: 8.47%
• Vacancy rate: 1.5% (up from 1.4% over the past 12 months)
• Rental growth: 7.9%
• Auction clearance rate: 46.5%
• Average days on market: 33–40 days, with longer selling periods in premium suburbs

Housing Supply

Residential building approvals increased by 1.93% to December 2025; however, approval levels remain historically low relative to long-term averages.

Key considerations include:

• Reduced dwelling approvals over the past two years are expected to result in lower housing completions.
• Challenging market conditions continue to limit new apartment developments across NSW.
• Forecast dwelling completions of approximately 24,000 dwellings per annum over the next two years remain below historical averages.
• Rising construction costs and tighter credit conditions continue to constrain supply.
• Sydney remains Australia’s least affordable capital city.

Rental growth is expected to remain strong, particularly within the apartment market where demand continues to exceed available supply.

Growth Areas to Watch

The strongest-performing locations across Sydney are expected to remain concentrated within the Western and South-Western growth corridors, supported by affordability, population growth, infrastructure investment, and the opening of Western Sydney International Airport.

Key Locations

Marsden Park

• Master-planned community
• Direct access to the M12 Motorway
• Benefiting from proximity to Western Sydney Airport

Bankstown

• Significant uplift from Metro rail integration
• Improved connectivity and urban renewal opportunities

Liverpool

• Strong health and education employment hubs
• Ongoing infrastructure investment

Austral & Leppington

• Benefiting from South-West Rail Link
• Attractive to first-home buyers due to affordability and modern housing stock

Parramatta

• Sydney’s second CBD
• Supported by Metro West, Light Rail, and ongoing commercial investment

Construction Costs

Indicative construction costs across NSW currently range between:

Construction feasibility remains under pressure due to:

• Rising labour and material costs.
• Potential softening in end values across some markets.
• Increased risk for medium-density projects, particularly developments up to 100 apartments.
• Escalating costs associated with fuel, bitumen, PVC products, and transport logistics.
• Greater transfer of construction risk to developers through rise-and-fall clauses, provisional sums, and increased deposit requirements.

Summary

The NSW residential market continues to be characterised by a significant imbalance between housing supply and demand.

Key themes for 2026 include:

• Housing affordability remains a major challenge across Sydney.
• Strong population growth continues to drive housing demand.
• Housing supply remains well below required levels and is expected to stay constrained over the medium term.
• Rental markets are likely to remain tight, supporting ongoing rental growth.
• Western Sydney and regional NSW are expected to experience the strongest growth, driven by affordability, infrastructure investment, and employment opportunities.
• Sydney dwelling values may be approaching a cyclical peak but remain well above national averages.
• Premium market segments are likely to face the greatest pricing pressure as affordability constraints continue to impact buyer demand.

For brokers and their clients, opportunities remain strong across growth corridors, residential investment markets, and development projects where experienced finance structuring and lender access can create a competitive advantage.

About Millbrook Group

Millbrook Group is a specialist commercial and development finance partner dedicated to helping brokers deliver tailored funding solutions for their clients. With deep expertise across residential, commercial, construction, development, and private lending, we work closely with brokers to structure complex transactions and provide access to a broad panel of funding partners.

Our focus is simple: helping brokers grow their businesses by providing responsive service, credit expertise, and funding solutions that traditional lenders may not always accommodate. Whether it’s a first-time developer, a sophisticated investor, or a commercial borrower requiring a bespoke structure, Millbrook Group can assist brokers in securing the right outcome for their clients.

View our lending options here: https://millbrookgroup.com.au/borrow/