ANZ has released its latest Commercial Property Update for Q2 2026, exploring the outlook for Australia’s commercial and residential property markets amid heightened global uncertainty, higher interest rates and shifting supply and demand dynamics. The report highlights continued housing undersupply, a two-speed residential market, improving but uneven office conditions, and a commercial property sector increasingly shaped by asset quality, location and sector-specific supply pressures.
Executive summary:
- Global geopolitical tensions have lifted energy prices, contributing to higher inflation and renewed interest rate tightening in early 2026. ANZ Research expect one further rate hike in May 2026.
- Housing markets remain undersupplied, supporting prices in Perth, Brisbane and Adelaide despite rising rates. But declining borrowing capacity and weaker confidence have seen the Sydney and Melbourne markets soften, and this will gradually impact other markets as well.
- Office markets continue to improve, albeit unevenly, characterised by differing supply outlooks and a persistent flight‑to‑quality.
- Industrial rental growth has slowed materially as a wave of new supply reaches the market.
- Retail property remains resilient, supported by non‑discretionary spending and improving CBD occupancy.
Economic Outlook
The conflict in the Middle East has a range of implications for the global economy. While a repeat of the Global Financial Crisis seems unlikely, it has proven to be disruptive for global markets and economies. Oil prices have risen sharply and are currently hovering around 100 USD/bbl. For Australia, petrol prices have jumped nearly 50% since the escalation of the conflict (even after reducing the petrol excise tax) and there are concerns around potential supply disruptions. Australia imports the vast majority of its diesel (89%) and gasoline (66%). While very little of this comes directly from the Middle East, it is highly dependent on Middle East crude and refined products via Asia-Pacific trading hubs which are supplied by Persian Gulf countries. So far, the RBA has been more focused on how the conflict will affect inflation, rather than on its impact on economic activity. ANZ Research expect headline inflation to peak around 5% in Q2, largely due to the impact of higher fuel prices. Inflation expectations (which have a strong relationship with petrol prices) are currently around a record high in the ANZ-Roy Morgan Consumer Confidence survey....
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