Australia’s housing market loses altitude as rate hikes bite deeper

Australia’s property market has moved beyond the polite language of softening. Values are falling across almost every suburb in the country’s biggest cities, and the damage is clearest in Brisbane and Sydney, where the retreat is gathering pace rather than pausing for breath.

Cotality data released on Thursday shows national property values are down 5.2% from their peak in March to where they were a year ago. That slide has come as the Reserve Bank lifted rates for the fourth time this year on Tuesday, a move that pushed more buyers out of the market and, predictably enough, made borrowing less generous. Economists say prices are on track to fall at least 10%.

Brisbane has taken a sharper hit than Sydney. Home prices in the Queensland capital fell 1.5% in September, and every suburb in the city recorded lower prices than in June. The median Brisbane home was worth $1.05m, down $59,000 since May, after prices had surged 18% over the previous 12 months. Sydney’s median values fell 1.4% in the month and were down 8.6% from their record high in March, equal to a $112,000 drop. Just four Sydney suburbs have held steady in recent months.

Melbourne has not escaped the downturn either. Prices there were down 7.2%, or $63,000, from November 2025, although a handful of suburbs have still seen prices rise. Joe Trucchio, a buyer’s agent at Property Home Base, said the slowdown had spread across the city and that the spring buying season had not picked up as it had in previous years. Interest rates, he said, had become the dominant concern among hesitant buyers.

That caution is hardly mysterious. Canstar estimates this year’s four rate hikes have cut $47,400 from the borrowing capacity of someone on the average annual full-time wage of $108,650. Homes at the cheaper end of the market have attracted more interest as first-home buyers regained some confidence, but the arithmetic remains stubborn. Housing values would need to fall by about 10% to offset a 1 percentage point rise in interest rates, and no suburbs have reached that threshold.

The Albanese government said on Thursday that more than 102,000 people had been supported with first-home loans under the 5% deposit scheme in the year since it was expanded. Since June, the scheme has averaged more than 8,400 first-home buyers a month, broadly steady against the 8,600-a-month average from October to May. It is useful policy, but not the sort that can bully mortgage rates into submission.

Reserve Bank governor Michele Bullock said on Tuesday that the central bank had considered keeping rates on hold because the housing market was unexpectedly weak, but ultimately decided to lift. She also said falling prices would probably worsen housing supply by making new construction unprofitable. Australia’s shortage of housing is still expected to force prices back up eventually, though the fading prospect of rate cuts makes a longer downturn more likely.

AMP chief economist Shane Oliver said the Cotality figures supported forecasts of prices falling at least 10% nationally. He said rate hikes, tax hikes and poor confidence were the main drags, while rising distressed listings and higher unemployment could risk a deeper fall of around 15%. For a market long accustomed to rising almost by habit, that is a less flattering lesson than many would like.

Written by Christiane Hofreiter christiane.hofreiter@alpineweekly.com