Big Banks Diverge on Australian Housing Forecasts for 2026–2027

Australia's two biggest mortgage lenders are telling very different stories about where house prices are headed. CBA is cautious — pointing to stretched affordability and a market that's run hard. Westpac is bullish — arguing that chronic supply shortfalls will keep pushing prices up faster than most expect. For anyone making a property decision in 2026, understanding which view is more likely to be right (and why) matters enormously.

Here's a breakdown of what each bank is forecasting, where they disagree most, and the wildcard that neither fully accounts for.

The forecasts side by side

Sources: CBA Economics, Westpac Economics. Forecasts as at early 2026. Brisbane, Perth and Adelaide Westpac 2026–27 figures are estimates based on published national and city-level commentary.

The numbers that jump out: Perth is forecast to grow between 8% and 15% in 2026 depending on which bank you ask — a seven-percentage-point spread. Melbourne shows the starkest divergence for 2027, where Westpac (6%) is double CBA's call (3%).

Why CBA is more cautious

CBA's economists are anchoring their view on affordability constraints. Australian households are already carrying some of the highest mortgage debt relative to income in the world. After the sharp price surges in Perth (up ~65% since 2020) and Brisbane (up ~55%), CBA argues those markets are now pricing in a lot of good news.

Their model suggests the RBA's expected rate cuts in 2026 will provide a modest tailwind — enough to prevent declines — but not enough to re-ignite the explosive growth seen in 2021 or the 2023–2024 bounce. For Sydney, at a median above $1.5 million, CBA sees the market constrained simply by what buyers can borrow and service.

CBA's more bullish Perth and Brisbane 2026 numbers reflect the reality that those markets are still running hot coming into the year — their caution is more about the moderation they expect in 2027 and beyond.

Why Westpac is more bullish

Westpac's case rests primarily on supply. Australia is running approximately 80,000–100,000 dwellings below the federal government's housing target annually. This structural shortfall — driven by planning constraints, construction cost inflation, and a fragmented building industry — means demand from both population growth and household formation consistently exceeds new supply.

Westpac points out that rental vacancy rates remain near record lows in most cities, pushing renters toward buying and keeping upward pressure on both rents and purchase prices. Rate cuts, when they come, act as an accelerant on top of this supply problem rather than as a primary driver.

Their economists also note that overseas migration — running at roughly 500,000+ net per year through 2024–25 — is still flowing through to housing demand with a 12–18 month lag, meaning the peak demand impact may not hit until late 2026 or 2027.

Melbourne: the biggest disagreement

The sharpest divide is Melbourne in 2027: CBA at +3%, Westpac at +6%.

Westpac's bull case for Melbourne is essentially a catch-up trade. Melbourne was the worst-performing major capital from 2022–2025, dragged down by aggressive land tax changes, work-from-home preferences reducing inner-city demand, and an oversupply of apartments. But Westpac argues the pendulum has swung too far: Melbourne is now significantly cheaper relative to Sydney than at any point in the past decade, interstate migration to Melbourne is picking up, and the land tax changes are now fully priced in.

CBA's more cautious view reflects ongoing concerns about Melbourne's high household debt levels, a larger proportion of interest-only loans rolling off fixed periods in 2026, and continued investor wariness about Victoria's tax environment.

Neither view is obviously wrong — Melbourne has a long history of confounding forecasters in both directions.

The one thing both banks agree on

Despite the disagreements on magnitude, both banks are forecasting positive returns in every capital city for both years. There is no scenario in either bank's published forecasts where any Australian capital city posts negative price growth in 2026 or 2027.

The key supports underpinning this floor:

• RBA rate cuts: Markets are pricing 2–3 more rate cuts in 2026, reducing mortgage stress and improving borrowing capacity for buyers
• Rental market pressure: With vacancy rates below 1.5% in most capitals, renters are under sustained pressure to buy, supporting demand
• Tight construction pipeline: Approved but not yet built dwellings are declining, and builder insolvencies have shrunk the active construction workforce
• Population growth: Australia's population grew by 2.3% in the year to June 2025 — among the highest in the OECD — with no sign of slowdown

Even CBA's most conservative forecast (Melbourne +1% in 2026) is positive. In a market like this, the real debate is about the pace of growth, not the direction.

The CGT discount cut: the wildcard neither bank fully prices in

There is one scenario that could meaningfully change the picture: Labor's proposed reduction of the capital gains tax discount from 50% to 25% on new assets.

For property investors, the CGT discount has been one of the primary arguments for holding property over the long term — it substantially reduces the tax bill on eventual sale. Cutting it halves the after-tax benefit of capital growth, which directly reduces what investors are willing to pay today.

SQM Research has modelled the impact at approximately -0.9 percentage points off national capital city price growth by end-2027 — not a collapse, but a meaningful drag. Perth and Brisbane are most exposed, given their elevated proportion of investor buyers relative to owner-occupiers.

The policy has not been legislated, and the Senate crossbench remains a key obstacle. But if it passes, both CBA and Westpac's forecasts would likely need to be revised lower — particularly for the investor-heavy unit markets in Brisbane and Perth's outer suburbs.

For context, our Capital Gains Tax Calculator shows what the discount is currently worth at various price points, and how the cut would change your after-tax gain.

What this means for buyers and renters

If you're a buyer: The broad consensus is that 2026 is not a bad year to buy in any major city. The debate is whether you'll get 1% or 15% growth — not whether you'll get any at all. Perth and Brisbane buyers face the most urgency if CBA's aggressive 2026 numbers prove accurate. Melbourne buyers have more time, but if Westpac's catch-up thesis plays out, that window won't be open forever.

If you're a renter: Rising rents and rising prices mean both sides of the ledger are working against you if you want to eventually buy. The window to accumulate a deposit is narrowing in Perth and Brisbane specifically. The rent vs buy calculation is increasingly city-specific — which is why we built a calculator to run the numbers for your exact situation.

For investors: Watch the CGT policy closely. It's the biggest potential shift to property investment economics in a decade, and neither bank has fully stress-tested their forecasts against a scenario where it passes.