Market Update — Monday, 2 February 2026

Headline summary

Australia’s housing market is entering February with momentum returning — but in a more measured and selective form. Listings are rebuilding after the holiday slowdown, investor enquiry is lifting, and rental conditions remain supportive. At the same time, price growth is showing early signs of unevenness, particularly across higher-priced capital-city segments. For investors, this is a market that rewards preparation, clarity and discipline rather than urgency.

National overview (prices and auctions)

National dwelling values ended January broadly stable, extending the softer tone that emerged late last year. CoreLogic reporting indicates that while overall prices remain well above pre-2024 levels, growth is no longer uniform. Sydney and Melbourne continue to experience the greatest sensitivity to affordability and borrowing constraints, while many mid-priced and regional markets have remained comparatively resilient.

This divergence is increasingly evident across price segments. Lower- and middle-priced dwellings continue to attract deeper buyer demand, reflecting both serviceability limits and changing buyer priorities. Upper-quartile markets, by contrast, are experiencing longer selling times and more negotiation, particularly where vendor expectations remain anchored to last year’s peak conditions.

Auction activity is gradually rebuilding as February progresses. While clearance rates can be volatile at this time of year due to thinner volumes, the underlying signal is consistent: quality stock in well-located areas continues to attract competition, while secondary or over-priced listings are being left behind.

Rentals (vacancy and yields)

Rental markets remain a central pillar of investor confidence. Vacancy rates are still sitting below long-run averages across most capitals, even after the typical seasonal easing over summer. As households re-enter the market following the holiday period, leasing demand has firmed, particularly for family-sized homes and well-located units close to employment and transport.

Advertised rents remain materially higher than a year ago, helping to stabilise yields despite higher interest costs. While the pace of rental growth has moderated from the extremes of earlier cycles, conditions continue to favour landlords in supply-constrained locations. Investors who prioritised tenant appeal and livability are seeing the benefits through lower vacancy and more stable cash flow.

Lending and finance (investor activity)

Investor lending activity is showing early signs of acceleration as the year gets underway. Many buyers are now acting on pre-approvals arranged late in 2025, with enquiry levels lifting across both established and emerging investment markets. Importantly, this renewed activity is being accompanied by a more conservative mindset.

Rather than chasing short-term growth narratives, investors are increasingly focused on serviceability, buffers and long-term holding capacity. Lending settings remain tight, and prudential oversight continues to shape borrowing behaviour — reinforcing the importance of strong fundamentals over speculation.

Risks and watch-items

• Affordability pressure: Higher borrowing costs and stretched price points are limiting demand in premium segments.
• Stock recovery: A faster-than-expected rise in listings could ease competition in some pockets.
• Credit settings: Ongoing prudential oversight may constrain leverage for some investors.
• Market divergence: Performance gaps between suburbs and property types are widening.

Firm Foundations Property perspective

From our perspective, the early-2026 market is best approached with clarity rather than speed. The opportunities that exist today are not driven by broad market momentum, but by careful selection — buying assets that can perform regardless of short-term price movements.

We continue to favour properties with durable rental demand, constrained local supply and pricing that can be defended on fundamentals. As the market normalises after several volatile years, disciplined execution is becoming a greater source of competitive advantage than timing alone.

Conclusion

The Australian property market is settling into a more balanced phase. Listings are rising, investor activity is returning, and rental conditions remain supportive — but the margin for error is narrower than in prior years. Investors who remain selective, cash-flow aware and patient are best placed to navigate the year ahead.