Why Property Prices Are Holding Firm in 2026

TL;DR

• Structural supply shortages, not speculation, are supporting property prices in 2026.

• Buyer demand has normalised, but quality stock remains limited.

• Illawarra markets continue to benefit from owner-occupier demand and lifestyle-driven migration.

• Interest rates influence borrowing power, but they're only one part of the pricing equation.

• Buyers who understand why prices are holding firm are better positioned to make calm, confident decisions.

Introduction: Why Buyers Are Questioning the Market in 2026

Many buyers entered 2026 expecting property prices to soften meaningfully.

After several years of rate rises, tighter lending and broader economic uncertainty, it seemed logical to assume prices would retreat. Instead, many markets across NSW — including the Illawarra — have remained unexpectedly resilient.

For buyers sitting on the sidelines, this has created frustration and confusion. If conditions are "harder," why haven't prices fallen further? And more importantly, does holding firm mean the market is overheated, or simply stabilising?

Understanding what's actually propping up prices is essential before making any buying decision this year.

Supply Constraints Are Doing the Heavy Lifting

The single biggest reason prices are holding firm in 2026 is ongoing undersupply.

New housing hasn't kept pace.

Across NSW, new dwelling construction has slowed due to:

• rising building costs

• labour shortages

• financing challenges for developers

• longer approval and delivery timelines

This has reduced the volume of new stock entering the market, particularly in established owner-occupier suburbs.

In regions like the Illawarra, where developable land is limited by geography and zoning, this effect is even more pronounced.

Listings remain tight

Many existing owners are choosing not to sell. Reasons include:

• locked-in low interest rates from prior years

• difficulty in finding a suitable replacement property

• uncertainty around timing the market

When fewer sellers list, competition concentrates on quality homes, keeping prices supported even when overall demand softens.

Demand Has Shifted, Not Disappeared

Buyer demand in 2026 looks different to previous cycles, but it hasn't vanished.

Fewer speculative buyers, more deliberate ones

What's left mainly in the market are:

• short-term speculators

• highly leveraged investors chasing rapid growth

What remains is:

• owner-occupiers

• long-term investors

• lifestyle-driven buyers

This shift matters. Owner-occupiers tend to buy based on use value rather than short-term price movements, which supports price stability.

In areas such as Wollongong and surrounding coastal suburbs, lifestyle and liveability continue to underpin demand.

Population and migration dynamics

While interstate migration has normalised, internal movement within NSW continues — particularly buyers relocating from Sydney to regional coastal centres.

For many, the Illawarra still represents:

• relative value compared to Sydney

• improved lifestyle outcomes

• substantial employment and education access

These demand drivers are slower-moving but more durable than speculative cycles.

Interest Rates Matter — But They're Not the Whole Story

Interest rates undeniably affect borrowing power, but they don't directly set prices.

Borrowing capacity vs willingness to pay

Rates influence how much buyers can borrow, but prices are ultimately set by:

• competition for limited stock

• buyer confidence

• household income stability

• long-term expectations

In 2026, many buyers have already adjusted their expectations. They're borrowing less than they could in previous years — but they're also competing for fewer properties.

The result is not runaway growth, but price resilience.

Rate stability reduces uncertainty.

Markets dislike uncertainty more than high rates. As rate expectations stabilise, buyers gain confidence to transact — even if borrowing costs remain elevated.

This stability helps prevent sharp price corrections.

Local Insight: What Buyers Often Misinterpret

A common misconception is that prices should fall simply because conditions are more challenging.

In reality:

• More challenging conditions can reduce supply just as much as demand

• Many owners can afford to wait

• Distressed selling remains limited

In the Illawarra, strong owner-occupier participation means fewer forced sales compared to heavily investor-driven markets.

This dampens volatility and supports gradual price movements rather than sharp declines.

Buyers expecting dramatic drops often underestimate how structural these supports are.

Optional Reality Check: What Price Stability Does (and Doesn't) Mean

Price stability in 2026 does not mean:

• Every property is worth more

• Buyers should overpay

• Negotiation opportunities don't exist

It does mean:

• Quality properties still attract competition

• Pricing errors are punished quickly

• Strategy matters more than timing

Understanding value at a micro level — street, block, layout and condition — is more important than broad market headlines.

Conclusion: A Market Defined by Balance, Not Boom or Bust

Property prices holding firm in 2026 isn't a sign of irrational exuberance.

It's a reflection of supply constraints, measured demand and a market adjusting to new norms.

For buyers, this environment rewards preparation, patience and clarity — not urgency or fear of missing out.

Those who understand why prices behave the way they do can make informed decisions without trying to predict the next cycle.

Your Next Step.

If you're weighing up whether to buy now or wait — and want clear, local insight rather than market noise — we're happy to help.

📧 Contact The Shoreline Agency at joel@theshorelineagency.com.au to discuss how current market conditions apply to your specific goals.

This article provides general market commentary only and does not constitute financial or investment advice. Buyers should seek advice tailored to their personal circumstances.