Three Years Later, the US Just Raised Rates. What Does It Mean for Australia?

For the first time in more than three years, the US Federal Reserve has raised interest rates. On Wednesday, the Fed increased its federal funds target by 0.25 percentage points to a range of 3.75% to 4.00%, with the decision reflecting continued concerns about inflation despite reasonably solid economic growth. The Fed said economic activity remained firm, productivity and investment were strong, and inflation was still elevated enough to warrant further tightening.

For Australians, the obvious question is whether this means Australian interest rates are about to head higher as well.

The short answer is not necessarily.

The RBA does not simply look across the Pacific, see what the Fed has done and decide that it probably ought to do the same thing. Australian interest rates are set according to Australian economic conditions, particularly inflation, employment, household spending and the broader state of the economy. However, that does not mean what happens in the US is irrelevant to us. Far from it.

The global financial system is a fairly interconnected machine, and changes in US interest rates can eventually work their way into Australian borrowing costs, the Australian dollar, financial markets and ultimately the property market. This is where things get a little more interesting.

What Just Happened?

The Federal Reserve has raised its benchmark interest rate by 25 basis points, taking the target range to 3.75% to 4.00%. It is the first US rate increase since July 2023, and the decision comes at a time when inflation remains above the Fed’s 2% target. The Fed’s latest projections also indicate that policymakers see the possibility of another increase before the end of 2026, although future decisions will depend on how the economy and inflation develop.

The interesting part for Australia is not necessarily the 0.25% increase itself. One quarter of a percentage point is relatively small in isolation, and Australian borrowers are not suddenly going to receive a letter from their bank because the Fed changed its rate yesterday.

What matters more is why rates are rising and what financial markets do in response.

When the world’s largest economy has stronger-than-expected growth and persistent inflation, investors can start expecting interest rates to remain higher for longer. That can influence government bond yields and other borrowing costs around the world. US government bond yields are particularly important because they sit near the foundation of global financial markets, so movements in the US can influence the cost of money elsewhere even when another country’s central bank is doing something completely different.

That is the first important distinction to make.

The Fed sets US monetary policy. It does not set Australian interest rates, but its decisions can influence the financial conditions in which Australian banks, businesses and households operate.

The RBA Doesn’t Have to Follow the Fed

It is tempting to think that if the US raises rates, Australia eventually has to raise rates as well. It sounds logical, but monetary policy doesn’t quite work that neatly. The RBA is setting interest rates for the Australian economy. If Australian inflation is falling, employment is weakening and household spending is slowing, the RBA could decide that higher Australian interest rates are not appropriate even if the Fed is tightening.

The reverse is also true. If inflation in Australia remains too high or domestic demand proves stronger than expected, the RBA could raise rates even if the Fed is holding steady. There is another factor as well, and this is where exchange rates become important.

If US interest rates rise relative to Australian rates, the difference between the returns available in the two countries can change. That can influence international capital flows and the Australian dollar. A weaker Australian dollar can make imported goods and some other costs more expensive, which can feed into Australian inflation.

The RBA has previously highlighted several ways that US financial conditions can affect Australia, including global bond yields, exchange rates, asset prices, offshore funding and trade.

So there is a connection, but it is not a simple Fed up = RBA up equation.

How Interest Rates Flow Through to Australian Borrowers

The important point is that these rates are connected, but they are not interchangeable. The RBA cash rate is the starting point for monetary policy, but banks still have to fund the loans they provide and price those loans according to their own costs, competition and expectations about future interest rates. This is why a movement in global bond yields can matter to Australian borrowers without the RBA necessarily changing the cash rate at exactly the same time.

Australian Mortgage Rates Don’t Only Depend on the RBA Cash Rate

This is probably the most important part of the story for Australian borrowers. When we talk about interest rates, we often focus almost entirely on the RBA cash rate because that is the number we hear about every month. And it is certainly important. The cash rate influences other interest rates throughout the economy, including mortgage rates and deposit rates.

But Australian banks don’t simply take the RBA cash rate, add a fixed margin and send everyone their new mortgage rate.

Banks have to fund the money they lend. Some of that funding comes from deposits, while some comes from wholesale debt markets and other sources. The cost of that funding can move for reasons beyond the RBA’s immediate decision. The RBA noted in its August 2026 Statement on Monetary Policy that major bank funding costs had increased by an estimated 18 basis points since May as higher cash rates flowed through to deposit and wholesale debt rates.

At the same time, competition between lenders had kept the spreads between lending rates and the cash rate relatively low. This is why looking only at the RBA cash rate can sometimes give you an incomplete picture. Think of the cash rate as one important part of the plumbing rather than the entire plumbing system.

If global borrowing costs rise, Australian banks can face higher funding costs even if the RBA is sitting still. That does not mean Australian mortgage rates automatically rise every time US bond yields move higher, because banks are also competing for customers and have other sources of funding. But it does mean there are pathways through which international financial conditions can eventually affect Australian borrowers.

And that brings us to the more interesting question……

Could Australian Mortgage Rates Rise Even If the RBA Doesn’t Move?

Yes, they could.

That doesn’t mean they necessarily will, but it is entirely possible for Australian mortgage pricing to change without the RBA changing the cash rate. The reason is that lenders price mortgages according to their own funding costs, capital requirements, competition and expectations about future interest rates. The RBA cash rate is a major influence, but it is not the only variable in the equation.

This is also why fixed mortgage rates can sometimes move before the RBA has actually made a decision. Banks and lenders are looking forward, not simply reacting to yesterday’s cash rate. The same principle applies in reverse. If global markets become more comfortable that inflation is coming under control and longer-term borrowing costs fall, lenders may have room to reduce some mortgage rates even if the RBA itself hasn’t yet changed the cash rate.

So when we hear that the Fed has raised rates, the question for an Australian borrower isn’t really:

“Will the RBA copy the Fed?”

It is more useful to ask:

“What happens to global borrowing costs, the Australian dollar, Australian inflation and bank funding costs as a result?”

Those are the transmission channels that matter.

So What Happens From Here?

There are a few different ways this could play out, and they don’t all lead to higher Australian mortgage rates.

Scenario 1: The US Rate Hike Is Largely Contained

The Fed raises rates, US inflation gradually improves, financial markets absorb the move and longer-term borrowing costs remain relatively stable. If that happens, the direct effect on Australia could be fairly limited.

The RBA can continue focusing on Australian conditions rather than feeling compelled to respond simply because the Fed moved.

This is entirely possible because central banks are ultimately dealing with different economies.

Scenario 2: Global Borrowing Costs Move Higher

The more important scenario for Australian borrowers would be a broader rise in global bond yields and wholesale funding costs.

If investors begin to believe that inflation will remain elevated for longer, they may demand higher yields on government bonds and other forms of debt. That can increase the cost of borrowing across financial markets, including for banks.

This is where the US rate decision could matter even without an immediate change in the Australian cash rate. The RBA has already pointed out that Australian financial conditions are influenced by global developments, and that US economic resilience and persistent inflation have contributed to expectations of a higher US policy rate path.

Scenario 3: The Australian Dollar Falls and Inflation Becomes a Bigger Issue

There is another possible pathway through the exchange rate.

If US interest rates rise relative to Australian rates, the Australian dollar can come under pressure. A weaker dollar makes some imported goods and inputs more expensive in Australian dollars.

That doesn’t automatically create a major inflation problem, but if inflation is already proving stubborn, it can make the RBA’s job more difficult.

And this is where the US and Australia can become connected without the RBA ever explicitly deciding to respond to the Fed.  The RBA isn’t raising rates because the Fed raised rates. It may instead respond to the effect that changing global financial conditions are having on Australia.

There is a fairly important distinction between the two.

What Could This Mean for Australian Property?

This is where we eventually get back to the thing most Australians are actually interested in.

Property.

Interest rates matter because they affect borrowing capacity and household cash flow. If mortgage rates rise, even modestly, the amount a household can comfortably borrow can fall. That can reduce the pool of buyers able to pay higher prices, particularly at the more heavily leveraged end of the market. But the relationship isn’t as simple as rates up = property prices down.

The Australian property market has many other moving parts. Employment, population growth, housing supply, household income, rents, investor activity, lending policy and the amount of stock available for sale can all influence market conditions. This is particularly important at the moment because the Australian housing market is already showing quite different conditions between cities.

The latest Cotality data, for example, shows the combined-capital Home Value Index has softened over the most recent four weeks, while markets such as Perth, Brisbane and Adelaide have continued to record stronger annual growth than Sydney and Melbourne. Rental growth also remains positive nationally, with the median rent sitting at $711 per week.

So an additional change in borrowing costs would not necessarily affect every Australian property market in the same way.

The Australian Property Market Doesn’t Move as One Market

This is something we have been talking about regularly in the weekly property updates, and it becomes even more relevant when looking at interest rates. Sydney isn’t Perth. Perth isn’t Melbourne. Melbourne isn’t Brisbane.

Different markets have different levels of supply, population growth, employment conditions, affordability and investor activity. Even within a single city, different suburbs and property types can behave very differently. That means the impact of higher global borrowing costs could also be uneven.

A highly leveraged market where affordability is already stretched may respond differently to a change in mortgage rates than a market where property prices are lower, rental growth is stronger and household debt is less of a constraint. This is why I think it is worth being careful with headlines suggesting that one change in US interest rates tells us what Australian property prices will do next.

It doesn’t. It is one piece of the puzzle.

What Should Borrowers Actually Be Watching?

Rather than becoming overly focused on every move by the Federal Reserve, Australian borrowers would probably get more useful information by watching several things together.

• Australian inflation remains important because it directly influences what the RBA does with the cash rate.
• The RBA’s own interest-rate decisions and commentary obviously matter because that is the monetary policy setting that directly affects Australian borrowing conditions.
• Mortgage rates from Australian lenders are also worth watching independently of the cash rate. Competition between banks can sometimes produce changes in mortgage pricing that aren’t perfectly aligned with the RBA’s movements.
• Global bond yields and borrowing costs matter because they influence the cost of funding in financial markets, including the markets Australian banks use.
• The Australian dollar is another piece of the puzzle, particularly if movements in the currency begin feeding through into imported inflation.

And then there are the things happening in the real economy: employment, household spending, housing credit, property prices, rents and listings.

Ultimately, those are the numbers that tell us whether the financial conditions are actually changing the behaviour of Australian households.

The Big Takeaway

The US has just raised interest rates for the first time in more than three years, and it is reasonable for Australian borrowers and property owners to pay attention. But there is no automatic chain reaction where the Fed raises rates, the RBA follows, Australian mortgage rates rise and property prices fall.  The reality is considerably more interesting. US interest rates can influence global borrowing costs, bond yields, exchange rates, financial markets and the cost of funding for banks.

Those changes can then flow into Australia, sometimes quite gradually and sometimes through channels that aren’t immediately obvious. At the same time, the RBA remains focused on the Australian economy. Its decisions will continue to be driven primarily by domestic inflation, employment, household spending and financial conditions rather than simply copying whatever the Fed has done.

For Australian borrowers, the important thing is therefore not to obsess over the US rate decision in isolation. Watch what happens next.

If global borrowing costs remain contained, the Australian impact could be relatively limited. If global yields move substantially higher, bank funding costs increase and the Australian dollar weakens, the implications become more significant. And if those changes begin feeding into Australian inflation, the RBA may have a different problem to deal with.

You don’t need to live in America to be affected by American interest rates – You just need a mortgage.

What This Means For

First Home Buyers

The improvement in auction clearance rates is worth watching, but the market is still a long way from the clearance levels seen a year ago. For first home buyers, this means there may still be opportunities to negotiate, particularly where a property has been sitting on the market or where competing buyers are limited. The important point is that conditions vary substantially between cities and even between suburbs, so the national headline should not be used as a substitute for understanding the particular market being considered.

Investors

Rental growth remains one of the stronger parts of the Australian property market, with the national median rent increasing 5.7% over the past year. That provides some support to rental income, although higher borrowing costs and purchase prices still need to be considered carefully. The difference between markets is also significant, with annual rental growth of 8.0% in Perth and 11.4% in Darwin compared with 4.8% in Sydney.

For investors, the current environment is therefore less about simply finding a market with strong headline growth and more about assessing the relationship between purchase price, rental income, borrowing costs, vacancy risk and the quality of the individual property.

Up-Sizers

For up-sizers, the current market presents an interesting mix. Softer recent home-value movements can potentially reduce the price gap between an existing property and the next property, while the higher overall level of advertised stock may provide more choice in some markets.

The catch is that this does not necessarily make the move easier, because the value of both the property being sold and the property being purchased can be moving at different rates. Getting the timing and finance structure right can therefore matter just as much as the headline market direction.

Auction Clearances In Select Markets

The latest preliminary results show a considerable spread between different parts of the Australian property market. Melbourne and Sydney are currently recording the strongest major-capital clearance rates, but some individual sub-regions are producing substantially higher results.

Among the selected markets reported by Cotality, Sydney’s Outer South West recorded a 90.0% preliminary clearance rate, while Melbourne’s South East recorded 76.1%. Melbourne’s Mornington Peninsula recorded 71.4%, Melbourne’s North East 66.7%, and Melbourne’s Outer East 65.7%. At the softer end, the Gold Coast recorded a preliminary clearance rate of 36.4%, followed by the Sunshine Coast at 40.0%, Brisbane at 41.6%, Perth at 46.7% and Canberra at 46.9%.

These figures are preliminary and some individual regions have relatively small auction volumes, so they should be treated as a snapshot of current auction conditions rather than a definitive ranking of overall market performance.

Key Market Indicators

The latest listings data covers the four weeks ending 13 September 2026. New listings were 6.8% below the same period last year, while total listings were 23.7% higher. This is an interesting combination because fewer genuinely new properties are coming onto the market, while the overall amount of advertised stock remains substantially higher than a year ago.

That distinction matters. A market can have fewer new listings arriving while still carrying a much larger pool of properties that have already been advertised, which can create different conditions for buyers and sellers than simply looking at the weekly listing flow would suggest.

Questions We’re Hearing

Is the Australian property market strengthening as spring begins?

There are some early signs of increased activity, particularly in the auction market. The combined-capital clearance rate has moved up to 58.5%, its strongest result in 19 weeks, while auction volumes increased 11.4% from the previous week. However, auction volumes remain 33.6% below the same week last year, so it is too early to describe this as a broad return to the stronger conditions seen previously.

The next few weeks should provide a better indication of whether the seasonal spring increase in activity is translating into stronger and more sustained buyer demand.

Are buyers getting more choice?

The answer is a little more complicated than simply looking at new listings. New listings over the latest four weeks were 6.8% below the same period last year, but total listings were 23.7% higher. This suggests there is a larger pool of advertised stock in the market even though the flow of genuinely new properties remains below last year’s level.

For individual buyers, the amount of choice will still depend heavily on the suburb, property type and price bracket they are targeting.

Which Australian markets are performing best?

There isn’t one answer because the results differ depending on whether we look at auctions, home values, rents or listings. Melbourne currently has the strongest major-capital auction clearance rate at 63.3%, followed by Sydney at 59.6%. Meanwhile, Perth continues to record strong annual home-value growth of 14.2%, compared with 9.4% in Brisbane and 8.0% in Adelaide.

Rental conditions also vary, with annual median-rent growth ranging from 3.2% in Canberra to 11.4% in Darwin. The better question is therefore not simply which market is strongest, but which part of the market is performing differently, and why?

The Orchard Lending View

Spring has arrived, but the property market hasn’t suddenly turned into a buying frenzy.

What we are seeing instead is a market beginning to show a little more activity while remaining highly selective. The improvement in auction clearance rates is encouraging from an activity perspective, but the fact that auction volumes remain more than 30% below last year tells us that the market is still operating at a very different level to the previous spring.

There is also a growing divide between different markets. Melbourne and Sydney are producing stronger auction results, while Brisbane and Adelaide have been more mixed, and the longer-term home-value numbers continue to favour markets such as Perth, Brisbane and Adelaide over Sydney and Melbourne. That makes the national headline increasingly less useful on its own.

For buyers, this environment can provide some breathing room. A stronger auction result does not automatically mean every property is attracting multiple competing buyers, and the much higher level of total advertised stock compared with last year suggests there can still be opportunities to negotiate depending on the property and location.

For sellers, however, the message is slightly different. Buyers have more information and more choice than they did during the strongest parts of the recent cycle, meaning realistic pricing and understanding comparable sales are increasingly important. Ultimately, the Australian property market is not moving as one market. The individual property, suburb and buyer circumstances matter considerably more than the national headline.

What We’ll Be Watching Next Week

As we move further into spring, there are a few things we’ll be keeping an eye on.

Auction activity – Approximately 1,930 homes are scheduled for auction this week, so we’ll be watching whether the increase in spring activity continues and whether higher volumes are accompanied by stronger clearance rates. Cotality expects auction volumes to fall to around 1,510 the following week due to the AFL Grand Final long weekend in Victoria.

Buyer demand – The key question is whether the improvement in preliminary clearance rates represents a sustained change in buyer activity or simply a stronger week within an otherwise softer market.

Differences between markets – Sydney and Melbourne are currently producing very different results to Brisbane, Adelaide and Perth across several measures. We’ll be watching whether those gaps widen or begin to narrow as spring progresses.

Listings and rental conditions – New listings remain below last year while total listings are substantially higher, and rents continue to rise nationally. We’ll be watching whether this combination persists and what it means for buyers, sellers and investors.

Next week should give us another useful piece of the puzzle as the spring selling season gathers momentum. For now, the numbers suggest more activity, but still a selective market rather than a broad-based return to boom conditions.

Australian Rents Are Hitting an Affordability Ceiling

Australia’s rental market has been one of the strongest parts of the property market over the past few years, with rents rising sharply as population growth, smaller household sizes and a shortage of available properties have combined to put significant pressure on tenants. However, there are now growing signs that the rental market is entering a different phase, with affordability becoming an increasingly important limit on just how much further rents can rise.

This does not mean the rental market is suddenly weak, and it certainly does not mean we are about to see rents collapse. Vacancy rates remain low across much of the country and there is still a significant shortage of suitable rental housing, with Cotality reporting a national vacancy rate of around 1.7% in late 2025 and rental listings still well below historical averages.

What is changing is the amount of financial pressure being placed on tenants, with households increasingly reaching the point where another large increase in rent means changing where they live, what type of property they rent, or how much of their income they are prepared to devote to housing. In other words, Australia’s rental market may be running into something that is becoming just as important as the shortage of properties itself: the tenant’s ability to pay.

Rents Have Risen Much Faster Than Incomes

The scale of the increase in rents since the pandemic is important when looking at where the market is heading. Realestate.com.au’s rental affordability research shows national advertised rents increased from around $420 per week at the beginning of 2020 to approximately $650 per week by the end of 2025, an increase of around 55%. Over the same broad period, median household income increased by approximately 33%, meaning rents have risen considerably faster than the incomes available to pay them. Cotality’s figures tell a similar story, although the measures and time periods are slightly different.

Its latest Rental Review found national rents had increased by 40.6% over the five years to June 2026, adding approximately $204 per week to the typical household’s rental commitment. Cotality also found that rental growth had accelerated to 5.9% annually, despite the fact that affordability is already extremely stretched.

The affordability impact is significant. Cotality’s research shows households are now committing around 33% of gross median household income to rent, compared with approximately 27% five years ago. Earlier Cotality data put the figure at 33.4% of pre-tax income, compared with a decade average of 29.2%. That is a significant change in the economics of renting, because while tenants can absorb higher rents for a period of time, there is ultimately a limit to how much of a household’s income can be committed to keeping a roof over their heads.

Rental Growth Is Still Strong, But The Market Is Changing

This is where the current rental market becomes particularly interesting. It would be wrong to suggest that rental growth has simply stopped. In fact, Cotality’s June 2026 data shows national rents increased by 5.9% over the previous year, with quarterly growth of 1.6%. That is still a substantial increase, particularly given how much rents have already risen. However, it is also well below the extraordinary rental growth rates recorded during the sharpest part of the post-pandemic rental boom, when annual growth was consistently above 8%.

What appears to be changing is where the limits of rental growth are becoming visible. Domain’s June 2026 Rent Report provides a good example. Every capital city recorded a record median house rent, yet the rate of growth was very different between markets. Melbourne’s median house rent was $600 per week and had increased by only 1.7% over the year, while Sydney reached $850 with annual growth of 7.6%, Brisbane reached $700 with growth of 7.7%, and Perth reached $750 with growth of 7.1%.

Domain’s chief residential economist Nicola Powell specifically noted that signs of affordability constraints are becoming more evident, with households eventually changing their behaviour once they reach the limit of what they can absorb in rent increases. That is an important distinction because it suggests the rental shortage can remain very real while individual markets begin to run into a ceiling on how much tenants can realistically pay.

Some markets still have considerable room for further rental growth, while others appear to be reaching the point where tenants are simply running out of capacity.

Renters Are Starting To Change Their Behaviour

The important thing about an affordability ceiling is that it does not necessarily mean tenants simply refuse to pay a higher rent, instead, they start making different decisions. A tenant paying $700 per week may be prepared to accept an increase to $730, particularly if moving would involve considerable costs and inconvenience.

However, if the asking rent increases to $800 or $850, the calculation can start to change. The tenant may decide to move further from the city, choose a smaller property, move from a house into a unit, take on a housemate or look for a suburb where their existing budget provides better value. Cotality’s latest research is already showing evidence of this shift, with unit rents having outpaced house rents over the past five years.

Cotality reported that unit rents had increased by 46.9% since March 2021 compared with 39.0% for houses, with the stronger recent growth in units increasingly reflecting renters seeking more affordable options as overall rental prices remain elevated. The Rental Affordability Index tells an even clearer story. A household earning the Australian median income of approximately $124,000 could afford just 37% of rentals advertised during the second half of 2025.

That was the equal lowest level recorded since the index began in 2008. Five years earlier, a median-income household could afford approximately 60% of advertised rentals. Perhaps more importantly, that 37% figure was unchanged from the previous year because income growth was broadly offsetting further increases in rents. In other words, affordability had become so stretched that the market was beginning to rely on wage growth simply to prevent the situation from becoming even worse.

That is a substantial change in the rental market, and it helps explain why rental growth can remain positive while affordability increasingly influences tenant behaviour.

This Could Be A Problem For Some Investor Expectations

For property investors, this is an important distinction. There has been a tendency in some parts of the market to assume that strong rental growth can continue indefinitely because Australia has a shortage of rental properties. While the shortage certainly supports rents, it does not give landlords unlimited pricing power. A property investor can increase the asking rent, but ultimately the tenant’s income still has to support it.

This becomes particularly important when investors are looking at highly leveraged properties or relying on future rental growth to improve their cash flow position. If an investor purchases a property assuming rents will increase by 7% or 8% every year, but actual rental growth settles closer to 3% or 4%, the difference can have a meaningful impact on the property’s cash flow over several years.

It is also worth remembering that higher interest rates, insurance, land tax, maintenance and other ownership costs do not automatically translate into higher achievable rents. The landlord’s costs and the tenant’s ability to pay are two separate things, and the market ultimately determines what a property can be rented for. This is where I think the next stage of the rental market could become more interesting for investors. Rather than simply asking whether rents are rising, investors may need to pay much closer attention to the relationship between the rent they are achieving, the local income levels and the affordability of competing properties.

In a market where tenants are becoming increasingly price-sensitive, the property that provides good value for its location and quality may ultimately have a stronger rental outlook than simply assuming every property in the area will achieve the same percentage increase.

The Rental Market Is Becoming More Uneven

The national numbers also hide some significant differences between individual cities. Domain’s June 2026 data showed Sydney remained Australia’s most expensive capital city for house rents at $850 per week, while Melbourne was at $600, Brisbane at $700, Adelaide at $650 and Perth at $750. However, the rate at which those rents were increasing was very different.

Source: Domain Rent Report, June 2026.

Melbourne is particularly interesting because it has gone from being one of Australia’s most expensive rental markets to the cheapest capital city for house rents, although describing Melbourne as “cheap” would obviously be stretching the definition when the median house rent is still $600 per week. The more important point is what has happened to rental growth.

Melbourne’s annual increase of just 1.7% is dramatically below the 7.6% recorded in Sydney and the 7.7% recorded in Brisbane, suggesting that tenants and landlords are operating in very different conditions depending on the city.  Domain’s research also provides a useful illustration of what an affordability ceiling can look like in practice. Melbourne’s rents have reached record levels, but the combination of greater rental supply and more price-sensitive tenants appears to be limiting how quickly landlords can continue pushing rents higher.

That does not necessarily mean Melbourne is an isolated example. As rents continue to rise in other cities, it is reasonable to expect more markets and more individual suburbs to eventually encounter similar constraints.

So Have Rents Peaked?

I don’t think the evidence supports saying that Australian rents have peaked nationally. The rental market remains undersupplied, population growth continues to create demand and there are still plenty of markets where tenants are competing for a relatively small number of properties. Cotality’s latest data shows national rents are still increasing at 5.9% annually, while vacancy rates remain tight and the supply of rental listings remains well below historical averages.

What I do think is becoming increasingly difficult to argue is that rents can continue increasing at the extraordinary rates we saw during the strongest part of the post-pandemic rental boom without eventually running into affordability constraints. The numbers are already telling us that this process has started. Rents have risen much faster than incomes, rental affordability has fallen to record lows and tenants are increasingly being forced to adjust their housing choices.

At the same time, rental growth has moderated significantly from the extraordinary levels seen earlier in the decade, even though it has recently begun to accelerate again. This creates an unusual situation where the rental market can remain very tight while affordability increasingly determines how far individual rents can go which may ultimately be the story of the next few years.

What Does This Mean For Investors?

For investors, I think the message is less about being bearish or bullish on property and more about being realistic about the assumptions being used when assessing an investment. A property purchased today should ideally make sense based on today’s numbers rather than requiring several years of aggressive rental growth to make the investment work.

Rental growth should certainly be considered, but assuming that rents will continue rising by 7%, 8% or 10% every year could become increasingly difficult to justify in markets where tenants are already allocating a very large proportion of their income to housing.

The other consideration is that rental affordability is likely to create greater differences between individual properties. A well-located property in an area where the rent remains relatively affordable compared with local incomes may continue to perform strongly, while properties already sitting at the upper end of what tenants can reasonably afford may find it harder to achieve another large increase.

For investors, this means the old question of “What rent can I get?” is becoming a little more complicated. The better question may be “What rent can I get, and how affordable is that rent for the type of tenant who lives in this property?” That is a much more useful question when assessing the sustainability of rental income.

Rent vs Buying: The Affordability Paradox

There is an interesting paradox developing here for renters, because as rents become increasingly expensive, the argument for buying a property can actually become stronger for some households, even though higher property prices and borrowing costs can make entering the market more difficult.

A renter paying $700 or $800 per week is already committing a substantial amount of their income to housing, so the question becomes whether continuing to rent provides better financial value than using a similar amount of money to service a mortgage and build equity, particularly when rent is expected to continue increasing over time.

Of course, this is not as simple as comparing the weekly rent with a mortgage repayment, because home ownership comes with interest, rates, insurance, maintenance, transaction costs and the opportunity cost of the deposit, while renting provides flexibility and allows the renter to invest or save the difference. The answer can therefore be very different depending on the property price, interest rate, deposit, expected property growth and future rental increases.

We will look at this in more detail in a separate article, where we will work through the numbers and look at the rent-versus-buying question over time, including the point at which buying may begin to financially outperform renting and when renting can still make more sense.

The Bottom Line

Australia’s rental shortage has not disappeared, and I don’t think we are suddenly heading towards a period of falling rents across the country.

What appears to be changing is the amount of room available for further rental increases before tenants begin changing their behaviour. In some markets, particularly those where rental supply is relatively better or rents have already reached very high levels compared with local incomes, that constraint is already becoming visible. In other markets, the shortage remains severe enough to continue pushing rents higher.

For investors, this means rental growth is likely to remain an important part of the property story, but it may be unwise to assume that the extraordinary rental increases of the past few years can simply continue indefinitely.

The next phase of the rental market may be less about a national boom or bust and more about affordability, local supply and the individual characteristics of each property. The shortage of rental housing remains very real, but the tenant still needs to be able to afford the property being offered.

The question is increasingly becoming not whether they will pay more, but how much more they can realistically afford before they change where and how they live.

Spring Begins With Auction Activity Still Well Below Last Year

Australia’s property market has entered spring, but the latest auction numbers suggest the seasonal lift is yet to translate into a major increase in buyer activity. Across the combined capital cities, 1,462 homes went to auction, unchanged from the previous week and 31.1% below the same week last year. The preliminary clearance rate edged up to 52.7%, only slightly above the previous week’s 52.4% and just 0.4 percentage points above the winter average. Melbourne recorded the most auctions at 662, with its preliminary clearance rate improving to 58.2%. Sydney also strengthened, reaching 57.7%, its highest preliminary clearance rate in 18 weeks. Meanwhile, Brisbane and Adelaide were noticeably softer, with clearance rates of 24.8% and 34.5% respectively.

The broader market remains mixed. Home values across the combined capitals fell 1.1% over the latest 28 days, while rental conditions continue to provide a different story, with the national median rent now $711 per week, up 5.7% over the past year. Overall, spring is bringing more activity, but not yet the kind of widespread buyer urgency that would suggest the market is heating up again.

What This Means For

First Home Buyers

More properties remaining on the market can mean more choice and potentially greater negotiating room. Softer short-term price movements may also provide some breathing space, although competition can still vary considerably between cities and suburbs.

Investors

Rental growth remains one of the stronger parts of the market, with the national median rent up 5.7% over the year. Softer property values may improve opportunities in some markets, but the individual property’s cash flow, borrowing costs and purchase price remain critical.

Up-Sizers

Increased listings can provide more choice when looking for the next home, while softer recent price momentum may make the transition easier in some markets. The key is managing the timing and finance of selling and buying.

Auction Clearances In Select Markets

This week’s preliminary auction results show a fairly wide spread between markets. Melbourne and Sydney recorded the strongest major-capital clearance rates, while Brisbane and Adelaide were considerably softer.

The regional results also highlight just how different local property markets can be. Newcastle and Lake Macquarie recorded a 90.9% preliminary clearance rate, while Melbourne’s Outer East reached 75.0%. At the other end, Melbourne’s Mornington Peninsula recorded 30.0%.

Selected higher clearance rates:

• Newcastle and Lake Macquarie, NSW: 90.9%
• Melbourne Outer East, VIC: 75.0%
• Melbourne South East, VIC: 68.0%
• Melbourne North West, VIC: 64.2%
• Sydney Inner South West, NSW: 63.0%

Selected lower clearance rates:

• Melbourne Mornington Peninsula, VIC: 30.0%
• Brisbane: 24.8%
• Adelaide: 34.5%
• Canberra: 36.7%
• Melbourne West, VIC: 38.1%

These are preliminary results, and some regions have relatively small auction volumes, so they should be treated as a snapshot rather than a definitive ranking of market strength.

Key Market Indicators

The latest listings data covers the four weeks ending 6 September 2026. New listings were 6.2% below the same period last year, while total listings were 24.4% above last year’s level.

Questions We’re Hearing

Is the property market getting stronger as spring begins?

Auction activity is expected to increase over the coming weeks, but the latest clearance rate remains close to the winter average. The next few weeks should give us a better indication of whether the seasonal increase in activity is being matched by stronger buyer demand.

Are buyers getting more choice?

The latest listings data shows total advertised stock remains below last year’s level, so the picture is not quite as simple as “more properties everywhere”. However, conditions vary considerably between markets, and some buyers may still find more negotiating room than they had during stronger periods.

Which markets are performing best?

The answer depends on what we’re measuring. Melbourne and Sydney currently have stronger major-capital auction clearance rates, while Brisbane and Adelaide are softer. Home-value performance also differs considerably between cities, so the national headline only tells part of the story.

The Orchard Lending View

Spring is here, but the market hasn’t suddenly turned into a buying frenzy.

The latest numbers suggest more activity is coming through, but buyer demand remains selective. Melbourne and Sydney are showing stronger auction results, while Brisbane and Adelaide are noticeably softer. For buyers, that can create opportunities to take a little more time and negotiate rather than feeling forced into a decision. For sellers, it reinforces the importance of realistic pricing and understanding what comparable properties are actually achieving. The broader market is still moving in different directions, and the property you’re actually buying matters far more than the national headline.

What We’ll Be Watching Next Week

As we move further into spring, there are a few things we’ll be keeping an eye on:

Auction activity – Will the expected increase in auction numbers continue, and will stronger activity translate into higher clearance rates?

Buyer demand – Are buyers becoming more confident, or are they continuing to take their time and negotiate as more properties come onto the market?

Differences between markets – Sydney and Melbourne are currently showing a different pattern to Brisbane and Adelaide. We’ll be watching to see whether those gaps widen or begin to narrow.

Rental conditions – With rents continuing to rise nationally, we’ll be watching whether rental growth remains strong and how this continues to affect investors and housing affordability.

Next week we’ll see whether the spring market starts to show a little more momentum, or whether buyers remain firmly in the driver’s seat….

Spring is normally when Australia’s property market starts to wake up.

The weather improves, auction activity increases, vendors decide it is time to sell and buyers who have been waiting through winter start looking more seriously. Over the past five years, Cotality says the number of new property listings nationally has typically increased by almost 25% between the end of August and the middle of November. But 2026 is shaping up differently, with the latest Cotality listings data shows 33,000 new properties came onto the market in the four weeks to 23 August, which was 8.2% below the five-year average and 2.0% below the same period last year. At the same time, total advertised stock had climbed to more than 137,000 properties, 1.7% above the five-year average.

That combination is fascinating; Fewer new properties are being listed while the total number of properties available for sale is increasing. For buyers, that can mean more choice and greater negotiating power. For sellers, it potentially means a much more difficult decision about whether to sell now or wait.

1. What’s happening with new property listings?

The first part of the story is the slowdown in new listings, with Cotality’s data shows new listings were broadly around their five-year average between February and early June. Since June, however, the flow of new properties coming onto the market has faded.

In the four weeks to 23 August, new listings were:

• 8.2% below the five-year average nationally
• 2.0% below the same period in 2025
• 14% below average in Sydney
• More than 9% below average in Melbourne
• Almost 5% below average in Brisbane
• Around 4% above average in Adelaide

Sydney is therefore leading the pullback, although the trend is increasingly broad-based. This is important because falling listings don’t necessarily mean sellers are confident, and as report in our Sydney August Property Update. In this case, the opposite appears to be happening, in that potential vendors are looking at softer property values, whilst fewer buyers and greater uncertainty around interest rates and deciding that now may not be the ideal time to sell.

2. But total listings are actually rising

This is where the story gets more interesting. If fewer properties are coming onto the market, you might expect the total amount of property available for sale to fall but it hasn’t trended this way so far. Cotality recorded more than 137,000 properties listed for sale nationally in the four weeks to 23 August being 1.7% above the five-year average; Back in mid-January, total listings were almost 26% below average. The simplest explanation is that properties are taking longer to sell and revelaing that when demand falls, but properties continue to come onto the market, unsold stock starts accumulating.

That changes the balance of power: A buyer who previously had to make an offer quickly because another five people were interested may now be looking at three or four comparable properties that have been sitting there for weeks, and that is a very different buying environment.

3. Buyers are getting more negotiating power

This may be the biggest takeaway from the latest data. Cotality says elevated stock levels in Sydney and Melbourne are already providing buyers with more choice and greater ability to negotiate around price and the shift has also become particularly noticeable in the mid-sized capitals. Brisbane is a good example whereby In the four weeks to 11 January, Brisbane’s total listings were around 43% below the five-year average. By the four weeks to 23 August, they were more than 16% above average, substantially reversing the trend. It doesn’t necessarily mean Brisbane property is suddenly oversupplied but it does mean the conditions buyers are facing are very different from earlier in the year.

This is where the distinction between “prices are falling” and “buyers have negotiating power” becomes important. A buyer might not get a 10% discount simply because the market has softened, but they may have more time and more properties to compare and less competition from other buyers. Ultimately this turns from fear of missing out, to fear of jumping too soon.

4. Why are sellers holding back?

There are several reasons potential vendors may be choosing to wait with the most obvious being price. If an owner believes their property could have sold for significantly more six months ago, they may not want to crystallise today’s lower valuation, and there is also the question of what happens after the sale. If someone sells their current home but then has to buy another property in the same market, falling prices can work both ways; Selling for less isn’t necessarily a disaster if the property they’re buying has also fallen in value at the same time. But if someone is selling purely to exit the market, refinance investment mortgage debt or move interstate, the decision can be more complicated.

Cotality points to falling values, cautious buyers, affordability constraints and uncertainty around interest rates as factors contributing to the slowdown in vendor activity. The Reserve Bank’s latest assessment adds another piece to the puzzle. Its August Statement on Monetary Policy says financial conditions have tightened following rate increases earlier in 2026, scheduled mortgage payments have risen relative to household disposable income, and established housing-market conditions have softened more than previously expected. That helps explain why both buyers and sellers are behaving cautiously.

5. What does this mean for the spring selling season?

This is where I think the Cotality data becomes particularly interesting. Historically, Spring brings a large increase in new listings, and analysis show that over the past five years new listings have increased by almost 25% between the end of August and the middle of November. But what happens if vendors don’t follow the usual seasonal pattern? We could end up with a spring market where:

More properties are available than last year…

but

fewer new properties are actually being added.

That sounds contradictory, but it makes sense when you consider how long properties are taking to sell. The key question for the next few months is therefore not simply: “How many properties are listed?” It is “How quickly are those properties being absorbed by buyers?” If listings continue to accumulate and clearance rates remain subdued, buyers could gain even more leverage. If buyers suddenly return and absorb the available stock, the dynamic could change quite quickly.

6. Sydney and Melbourne are already showing the change

Sydney is arguably the clearest example as new listings were more than 14% below the five-year average in the four weeks to 23 August, Melbourne was more than 9% below average. At the same time, both cities have experienced significant falls from their recent peaks. Cotality’s August Housing Chart Pack shows Sydney and Melbourne already more than 5% below their respective peaks. Cotality also notes that Melbourne has a much smaller buffer of accumulated growth than Perth, Brisbane or Adelaide. That creates a very different environment from the boom conditions we’ve become accustomed to. The seller can’t simply assume:

“If I wait another month, someone will probably pay more.”

And the buyer doesn’t necessarily need to think:

“If I don’t buy today, it’ll be 5% more expensive next month.”

Both sides have more reason to pause.

7. Brisbane tells a different story

Brisbane is particularly interesting because it has come from a much stronger growth cycle, and still retains a substantial buffer from its recent growth, even after the recent downturn began. Modelling suggests that even a hypothetical 20% decline from peak would only take Brisbane’s values back to around August 2024 levels; importantly, this is a scenario rather than a forecast. At the same time, Brisbane’s advertised stock has increased dramatically relative to its five-year average. This doesn’t necessarily mean Brisbane is heading for a major collapse, it means the market is normalising from an exceptionally strong period of growth.

8. What about Perth and Adelaide?

The mid-sized capitals are particularly useful when looking at this market because their starting points are different, with Perth, Brisbane and Adelaide also experiencing very strong growth over the preceding five years. As a result, they have considerably more accumulated growth to absorb if conditions soften. Further analysis shows that even a hypothetical 20% decline would leave Perth around April 2025 values, and Adelaide around April 2024 values, exampling stress scenarios, not predictions.

Adelaide is also behaving differently from Sydney and Melbourne when it comes to new listings, with new listings still around 4% above the five-year average in the four weeks to 23 August. So while we talk about an Australian housing market, the reality remains, Australia has multiple property markets moving through different stages of the cycle.

9. What does this mean for investors?

This is where the story gets particularly nuanced. Falling property values aren’t necessarily bad for investors if rental income remains strong and the purchase price becomes more attractive. Annual rental growth remained at 5.9% in July, while gross rental yields increased to 3.7% nationally as values softened, a natural construct of falling prices against rising rents. But investors are also dealing with tighter financial conditions, as the ABS reported that the number of new investor dwelling-loan commitments fell 8.6% in the June quarter, while the value of investor commitments fell 10.2%. That suggests investors aren’t simply rushing back into the market just because prices have softened, with additional holding cost increases, and potential impact of budget changes further adding to decision points.

For an investor, the equation remains: Purchase price + borrowing cost + expenses to be considered against rental income & future prospects and against other opportunities.

A cheaper property isn’t automatically a better investment but a market with less competition can create opportunities to buy a good property at a more sensible price.

10. What does this mean for first home buyers?

For first home buyers, this could be one of the more interesting spring markets we’ve seen for some time. The biggest advantage isn’t necessarily falling prices but time.  If a property has been sitting on the market for several weeks, buyers can inspect it properly, compare it with alternatives and negotiate without necessarily feeling that someone else will snap it up tomorrow, and favourable conditions in the contract. That doesn’t mean every vendor will negotiate, but there is more leverage on the buyer’s side, though the best properties in tightly held locations can still attract competition.

But the broader environment is increasingly giving prepared buyers something that has been in short supply during stronger markets: choice

11. What does this mean for sellers?

This is probably the side of the market that deserves more attention as a seller entering spring 2026 shouldn’t necessarily assume that the usual spring uplift will do the heavy lifting. There may be more buyers around than during winter, but those buyers are also likely to have more choice, and that makes pricing, presentation and realistic expectations increasingly important. The data suggests vendors who don’t need to sell may choose to wait, and for those who do need to sell, the market is telling them something fairly clearly:

The buyer has more leverage than the sellers did during the boom. Trying to price a property based on what the neighbour achieved six months ago may not produce the same result today, though buyers also need to understand there are still pockets of high demand that will wether the down-turn well.

12. So, is this actually good news for buyers?

Potentially, yes. Cotality’s conclusion is quite direct: buyers who have the confidence to transact in the current environment may have an opportunity because they face less competition, lower housing values and greater negotiating leverage. A softer market though, doesn’t mean every property is suddenly cheap, as mentioned in the point above; A great property in a tightly held suburb can still be expensive.

What has changed is the process of buying. There may be more opportunity to negotiate, and more opportunity to compare, added with more opportunity to walk away. All this potentially allowing more opportunity to find a property that works rather than buying simply because you’re worried about missing out.

13. The bigger question: what happens next?

This is the part I’m most interested in watching over the next few months, and there are two competing forces now operating in the market. Supply is pushing one way with more properties sitting on the market, giving buyers more choice. Vendor behaviour is pushing the other with ewer new sellers  choosing to list, which limits the flow of fresh stock. If buyer demand stays weak, total listings could continue to build even without a major increase in new listings or If buyer confidence improves, that stock could start clearing more quickly. And if interest-rate expectations change materially, the equation could shift again.

The RBA’s August assessment noted that established housing-market conditions had softened more than expected and that demand for new housing loans had declined noticeably, while financial conditions remained restrictive. So I don’t think the most useful question right now is:

“Are Australian property prices going up or down?”

It is:

“Who has the negotiating power, and how long does that last?”

What This Means For

First Home Buyers

This could be a more comfortable market to enter than the recent boom conditions. More stock and longer selling periods can provide additional time to compare properties and negotiate. The key is still having mortgage finance sorted before starting the search so that you can act when the right property appears.

Investors

The combination of softer values and continued rental growth is worth watching, particularly in markets where yields are improving. But higher borrowing costs and changing investor demand mean the numbers need to work on their own merits rather than relying on a future capital-growth story.

Up-Sizers

A softer market can potentially reduce the dollar gap between an existing home and the next property, particularly where both ends of the market have adjusted. More listings may also make it easier to find the right next home before committing to a sale.

Questions We’re Hearing

Why are property listings falling if there are more properties for sale?

Because new listings and total listings measure different things. New listings measure properties newly coming onto the market, while total listings include properties that have already been advertised but haven’t sold. If properties take longer to sell, total listings can rise even while fewer new properties are being added.

Is spring usually a good time to sell property?

Historically, spring brings a significant increase in listings and buyer activity. Cotality estimates new listings have increased by almost 25% between late August and mid-November over the past five years. The question in 2026 is whether vendors will respond in the same way given weaker prices and buyer demand.

Are buyers really in control of the market?

The evidence increasingly points in that direction, particularly in Sydney and Melbourne. Higher total listings, longer selling periods and weaker auction clearance rates can give buyers more choice and negotiating power. However, individual suburbs and property types can behave very differently.

Could fewer listings actually support property prices?

Potentially. If enough vendors hold back, the reduction in fresh supply could eventually help stabilise prices if buyer demand improves. That’s one reason why the next few months will be particularly interesting.

The Orchard Lending View

I think this is one of the more interesting property-market stories heading into spring.

We often talk about supply and demand as though they’re two fixed numbers. They’re not. Sellers can decide not to sell whilst Buyers can decide not to buy.

And right now, both sides are showing signs of caution. The result is a market where total stock is increasing, but the flow of new properties is slowing. That is giving buyers more leverage without necessarily creating the huge oversupply that some people might assume when they see listings rising. For buyers who are financially ready, I think that’s potentially a pretty useful environment. Not because property is suddenly cheap or because prices can’t fall further, but because you can negotiate again. And after several years where buyers in many parts of Australia have had to compete hard simply to secure a property, having a little more time and leverage is a meaningful change.The next few months will tell us whether this is simply a cooler spring, or the beginning of a much more significant shift in the way Australia’s property market operates.

Australian Property Market Heads Into Spring With Buyer Demand Still Selective

Australia’s property market is heading into spring with auction activity beginning to pick up, but the latest numbers suggest buyers are still being selective.

Across the combined capital cities, 1,482 homes went to auction, up 6.6% from the previous week, while the preliminary clearance rate eased to 52.4%. Sydney remained one of the stronger major auction markets at 56.3%, while Melbourne recorded the highest auction volume with 653 auctions and a 54.9% clearance rate. Brisbane was noticeably softer at 31.5%.

Home-value momentum remains softer across the major capitals, with the combined capitals recording a 1.1% decline over the latest 28-day period. However, the longer-term picture remains quite different between markets, with Brisbane, Adelaide and Perth still showing positive year-to-date growth while Sydney and Melbourne remain below their starting point for the year.

Rental conditions continue to provide a different story. The national median rent is now $708 per week, up 5.9% over the past year, while increased total listings are giving buyers more choice. Overall, the market appears to be entering spring with more activity, but not necessarily more urgency from buyers. and investor mortgages staying supressed.

What This Means For;

First home buyers:

More properties remaining on the market can mean more choice and potentially greater negotiating room. Softer short-term price movements may also provide some breathing space, although competition can still vary considerably between cities and suburbs. This can certainly help first home buyers with their home loans and required deposit/borrowing amounts.

Investors:

Rental growth remains one of the stronger parts of the market, with the national median rent up 5.9% over the year. Softer property values may improve opportunities in some markets, but the individual property’s cash flow, borrowing costs and purchase price remain critical.

Up-sizers:

Increased listings can provide more choice when looking for the next home, while softer recent price momentum may make the transition easier in some markets. The key is managing the timing and finance of selling and buying.

Is Sydney’s property market losing momentum, or simply changing gear?

Sydney’s property market is clearly in a different phase from the strong growth seen through much of 2025. Cotality’s latest data shows Sydney dwelling values fell 1.4% in July, taking the three-month decline to 4.0% and leaving values 5.3% below their January 2026 peak. At the same time, auction activity remains subdued, listings are behaving differently from a typical spring market, and sellers are having to negotiate harder to secure a sale.

But calling this simply a “Sydney property crash” would miss the more interesting story. Demand has weakened, but so has the flow of new properties coming onto the market. Sydney’s new listings were more than 14% below the five-year average in the four weeks to 23 August, meaning many potential sellers appear to be choosing to wait rather than test today’s market. Meanwhile, total listings have been building as properties take longer to sell. (Property Update)

For buyers, that combination can create something quite different from a straightforward falling-price market: more negotiating power, but not necessarily an endless supply of bargains. For investors, falling values are being accompanied by continued rental growth, while the differences between Sydney’s regions and between Sydney and other capital cities remain significant.

1. Sydney home-value movements

Sydney is currently one of Australia’s weaker major housing markets. Cotality’s July data shows Sydney dwelling values fell 1.4% over the month, 4.0% over the three months and 2.0% over the year. Values are now approximately 5.3% below the January 2026 peak. House values have been softer again, falling 1.7% in July and 4.6% over the latest quarter. (OpenAgent)

That is a meaningful change from the conditions Sydney experienced earlier in the cycle. However, the peak-to-current decline also needs some perspective. Cotality’s August Housing Chart Pack notes that even a hypothetical 20% decline from Sydney’s peak would take values back only to around May 2021, illustrating how much growth accumulated during the pandemic period. Cotality presents this as a scenario rather than a forecast. (Cotality)

2. Auction clearance rates

Auction clearance rates provide one of the clearest real-time indications that buyer demand has cooled. For the week ending 23 August, Sydney recorded 477 auctions, with a final clearance rate of 50.3%. That was an improvement from 47.1% the previous week, making Sydney the only capital city to improve on both auction volume and clearance rate that week. However, Sydney’s result remained well below the 71.6% clearance rate recorded in the same week of 2025.

The broader trend is important. Cotality says combined capital-city clearance rates had fallen from around 66% in February to the low 40% range by late June, and have remained subdued since. Historically, stronger clearance rates tend to coincide with stronger price growth, so the current auction results suggest buyer demand remains cautious. A 50% clearance rate doesn’t mean that half of Sydney’s properties are suddenly “worthless”. It means the auction process is producing much less competition between buyers than it was a year ago.

3. Auction volumes

Sydney’s auction volume tells another important part of the story. There were 477 Sydney auctions in the week ending 23 August, up 16.3% from the previous week. But compared with the same week in 2025, volumes were down 34.6%, from 729 auctions to 477. That is significant because fewer properties are being taken to auction at exactly the time when buyer demand is weaker.

Cotality’s longer-term analysis suggests vendors are increasingly choosing alternatives to auction, including private treaty sales, pre-auction transactions and withdrawals. Across Australia, the share of new listings going to auction had fallen to just over 30% by June, compared with almost 45% in November 2025. Sydney and Melbourne have led that retreat.

In other words, the auction numbers are telling us about seller behaviour as well as buyer behaviour.

4. New listings

This may be one of the most interesting parts of Sydney’s current market. You might expect falling prices and the approach of spring to bring a flood of new properties onto the market. Instead, Cotality’s latest listings data shows Sydney has been leading a national slowdown in new listings. In the four weeks to 23 August, Sydney’s new listings were more than 14% below the five-year average. Melbourne was more than 9% below average and Brisbane almost 5% below average.

That suggests many potential vendors are looking at current prices and deciding that waiting may be preferable to selling today. This is an important distinction. Sydney currently has weaker buyer demand, but it isn’t being met by an enormous surge in fresh supply.

5. Total listings

While new listings are falling, total advertised stock has been moving in the opposite direction. Nationally, total listings reached more than 137,000 properties in the four weeks to 23 August, which was 1.7% above the five-year average. Cotality says total stock had been almost 26% below average in mid-January, highlighting how quickly conditions have changed.

The reason is relatively simple: properties are taking longer to sell.

Sydney’s median selling time has increased to around 41 days, compared with 34 days a year earlier. That means even though fewer new properties are being added, existing stock can accumulate when buyers take longer to commit. For buyers, this is one of the more encouraging developments. More properties sitting on the market for longer can provide additional time to research, compare properties and negotiate rather than feeling forced to make a decision immediately.

6. Vendor discounting

Vendor discounting is another sign that the balance between buyers and sellers has shifted. Sydney’s median vendor discount has widened to approximately 4.2%, compared with 3.3% a year earlier. In simple terms, sellers are increasingly having to accept a price below their original asking price to secure a sale. Across the combined capital cities, the median vendor discount had widened to around 3.9% over the three months to July, up from 3.2% in the three months to April.

This doesn’t mean every seller is accepting a 4% reduction. The figure is a median and conditions can vary enormously between suburbs and properties. But the direction is useful: buyers are gaining more negotiating leverage.

7. Rental movements

The rental market is telling a rather different story from the sales market. Cotality reported national rental growth of 5.9% annually in July, continuing to outpace wage growth of 3.3%. Gross rental yields had also risen to 3.7% nationally as property values softened while rents continued to increase.

Sydney rents have also continued to rise. Cotality data reported by OpenAgent shows Sydney rents increased approximately 5.5% over the year to July, with house rents up 6.1% and unit rents up 4.4%. For investors, this creates an interesting contrast: capital values are falling while rental income is still increasing. That doesn’t automatically make every Sydney investment attractive. Interest costs, land tax, maintenance, vacancy, property quality and borrowing capacity still matter. But the rental side of the equation is currently considerably stronger than the sales side.

8. Differences between Sydney regions

Perhaps the biggest mistake a buyer or seller can make right now is thinking of “Sydney” as one single property market. Auction results, buyer demand and price movements can vary significantly between regions and individual suburbs. The latest weekly data continues to show strong competition for some quality properties even while broader clearance rates remain subdued. Recent reporting from Sydney’s auction market has highlighted properties attracting multiple bidders and selling above reserve, particularly where the property is well located, high quality or relatively scarce. At the same time, other auctions are attracting little or no bidding. (Daily Telegraph)

This creates an increasingly two-speed Sydney market.

A well-presented property in a tightly held suburb can still generate competition. A property that is overpriced, compromised or competing against a large amount of comparable stock can face a very different outcome. For buyers, this means the headline “Sydney prices are falling” shouldn’t automatically be interpreted as “everything is 5% cheaper”. For sellers, it makes accurate pricing and understanding the local competition increasingly important.

9. How Sydney compares with Melbourne, Brisbane, Adelaide and Perth

Sydney isn’t the only capital experiencing weaker conditions, but the degree of change varies considerably. Cotality’s August Housing Chart Pack shows Sydney and Melbourne have experienced the largest recent corrections, with Sydney more than 5% below its January peak. Melbourne has also fallen more than 5% from its peak after several years of relatively subdued growth.

The mid-sized capitals have had a different journey. Brisbane, Adelaide and Perth experienced considerably stronger growth during the preceding boom, leaving them with a larger accumulated buffer even as their markets have now started to soften. Cotality notes that even a hypothetical 20% decline would leave Perth around its April 2025 value, while Brisbane and Adelaide would similarly retain substantial portions of their recent gains.

Auction markets also differ. For the week ending 23 August, Melbourne recorded a final clearance rate of 51.9%, Adelaide 46.7%, Brisbane 32.7% and Perth 27.3%, although the Perth figure was based on only 11 auctions and should therefore be treated cautiously. Sydney’s 50.3% sat between Melbourne and Adelaide. The broader message is important: Australia does not have one property market. Sydney and Melbourne are currently dealing with a more pronounced correction, while the mid-sized capitals are coming off much stronger growth cycles.

10. What this potentially means for buyers and investors

For buyers, the current Sydney market may provide more breathing room than we’ve seen in recent years. Properties are taking longer to sell, vendor discounting has increased, auction clearance rates are around 50%, and new listings are below average. That combination can provide opportunities for buyers who are financially prepared and willing to negotiate rather than compete emotionally at auction.

For investors, the picture is more complicated. Falling property values can improve entry prices, while continued rental growth can support income. However, Sydney’s relatively high property values and comparatively modest rental yields mean investors need to assess the complete cash-flow position rather than relying on capital growth assumptions.

For first-home buyers, a softer market can be helpful because reduced competition may make it easier to negotiate and avoid being caught in a bidding war. But affordability and borrowing capacity remain critical, and a lower purchase price does not necessarily mean a property has suddenly become “cheap”.

For up-sizers, the current environment could be particularly interesting. If both the property being sold and the more expensive property being purchased have fallen in value, the dollar gap between the two can sometimes narrow. The challenge is timing the sale and purchase and making sure the finance works comfortably through the transition.

The Orchard Lending view

Sydney’s property market isn’t simply collapsing. It is changing gear.

Buyer demand has clearly weakened, but vendors are also responding by bringing fewer properties to market. At the same time, existing stock is taking longer to sell, giving buyers more choice and negotiating power. The result is a market where the headline numbers matter, but the local story matters even more.

For anyone considering buying, selling, refinancing or investing in Sydney, the most useful question may no longer be “What is the Sydney market doing?” but “What is happening to the type of property and area I’m actually interested in?”  That is where good finance advice and good property research need to meet. The market may be softer, but the right decision still depends on the individual property, the numbers and your own financial position.

Australian Property Market Shows Mixed Signals as Auction Activity Rises

Australia’s property market presented a mixed picture in the week ending 23 August 2026. Auction activity across the combined capital cities increased to 1,406 auctions, up 10.2% on the previous week, although the preliminary auction clearance rate eased to 53.2%. Sydney was the standout, with its clearance rate improving to 56.6%, while Melbourne remained the busiest market with 600 auctions but recorded a slightly lower 55.4% clearance rate. Adelaide also recorded a relatively solid 54.8% clearance rate, while Brisbane was softer at 40.4%.

Recent home-value momentum was more subdued, with the 28-day rolling figures in the report showing declines across the major capitals. The combined capitals recorded a 1.0% decline over the latest 28-day period, although the longer-term picture remains more varied. Brisbane, Adelaide and Perth showed positive year-to-date movements in the supplied figures, while Sydney and Melbourne remained negative over that period. This highlights the importance of looking beyond a single week’s movement when assessing the broader property market.

Rental conditions continue to provide another important part of the picture. The national median rent reached $708, with annual rental growth of 5.9%, while combined capital-city rents reached $741. Darwin recorded the strongest annual rental growth in the report at 10.4%. At the same time, increased property listings are providing buyers with more choice, with 21,211 new sale listings recorded over the four weeks to 16 August. Overall, the market appears to be entering a more nuanced phase, with auction activity improving but short-term price momentum softer, while rental markets continue to experience upward pressure.

What This Means For;

First home buyers: More properties coming onto the market could give buyers greater choice and negotiating room, while softer short-term value movements may provide some breathing space. Competition can still vary significantly between cities and suburbs.

Investors: Continued rental growth, with the national median rent at $708, remains supportive for investors, particularly in markets where rental yields are stronger. However, borrowing costs and the individual property’s numbers remain important.

Up-sizers: Increased listing activity may mean more choice when looking for the next home, while softer recent price momentum could make the transition easier in some markets. The key is managing the timing and finance of selling and buying.

A Structural Shift: Inside Australia’s New Property and Tax Framework

Australia has just detonated one of the biggest tax reforms in its modern history — a direct hit to the long‑protected pillars of property investment. What was once politically untouchable has now been rewritten, signalling a generational pivot from investor‑first policy to a system designed to favour workers and future home‑owners.

• The 2026 Budget marks the biggest shake‑up to property taxation in a generation, with the government walking away from long‑standing promises on negative gearing and capital gains tax.
• These reforms are pitched as a “Great Rebalance” — shifting tax benefits away from investors and toward wage earners, while trying to ease the generational divide in housing access.
• Negative gearing is being restricted to new builds only, CGT is being rebuilt around inflation‑indexed gains, and discretionary trusts face a new 30% minimum tax floor.
• The government claims the package will boost home ownership, raise $77.2 billion, and fund a permanent $250 Working Australians tax offset — but Treasury modelling also warns of a supply paradox that could tighten the rental market.
• Politically, this is a high‑risk, high‑reward move: a deliberate break with past promises in the hope that voters now prioritise housing affordability over investor incentives.

RBA Rate Changes During May 2026

The Reserve Bank of Australia (RBA) has increased the official cash rate by 0.25%, bringing it to 4.35%, the highest in 16 months. This marks the third consecutive rate hike this year, aimed at curbing inflation and controlling wage expectations. The decision comes amid rising inflationary pressures, both globally and domestically, and increased household spending.

Mortgage Repayments Rise as Borrowers Feel the Pressure

In its statement, the RBA noted that many businesses facing rising costs are preparing to lift prices, while short‑term inflation expectations have also edged higher. The latest increase pushes the average variable mortgage rate to 6.26%. For a $600,000 loan, today’s rise adds about $91 a month, with all three hikes this year adding roughly $272 to monthly repayments — more than $3,200 so far in 2026.

Economists Split on Whether Higher Rates Can Tame Inflation

Economists remain divided on whether higher rates will meaningfully slow inflation. Some argue global supply shocks — from geopolitical tensions to volatile energy markets — are driving price pressures beyond the RBA’s control. Others say the bank must still act to prevent temporary shocks from becoming entrenched through higher wages and broader price rises.

Household Spending Surges Despite Cost‑of‑Living Strain

Fresh ABS data shows household spending rose 1.6% in March, driven largely by higher fuel costs linked to the US–Iran conflict. Transport spending jumped 5.1%, while food spending increased 1.7% due to precautionary stockpiling. Hospitality spending fell 0.9% as households tightened budgets.

Inflation Accelerates, Driven by Transport and Fuel Costs

Inflation rose 4.6% over the year to March, with transport prices up 8.9% — the largest monthly increase on record. Economists warn that resilient spending may force the RBA to continue tightening, with non‑discretionary spending up 3.4% and discretionary spending also rising slightly.

Outlook: Spending Expected to Slow as Pressures Build

Analysts expect household spending to slow later in the year as higher rates and rising living costs weigh on budgets. Domestic demand continues to outpace supply, keeping inflation pressures elevated.

Key Insights

• Interest Rate Hike: The RBA raised the cash rate to 4.35% to combat inflation.
• Impact on Borrowers: The average variable home loan rate will rise to 6.26%, with an additional $91 in monthly payments for a $600,000 mortgage.
• Inflation Concerns: Global supply disruptions and domestic demand are driving inflation, which the RBA aims to control by managing inflation expectations.
• Household Spending: Increased by 1.6% in March due to rising oil prices and the US-Iran conflict, impacting transport and food costs.
• Expert Opinions: Economists express doubt about the RBA’s ability to control inflation solely through rate adjustments, citing external factors.

Data Table

Conclusion

The RBA’s strategy to manage inflation through rate hikes faces challenges due to persistent global and domestic pressures. While the aim is to prevent entrenched inflation expectations, household budgets remain strained, and spending patterns suggest continued economic tension

Housing prices are still climbing – but the heat is coming off

Australia’s housing market is still ticking higher, just not quite as fast as it was a few months ago. According to Cotality’s latest Home Value Index, national home values rose 1.0% in November 2025, the third month in a row of 1%-plus growth. That’s solid – but slightly softer than October’s 1.1% rise reported by Cotality; So we’re not in “boom” territory, but the market is still moving up in most places.

Australian Interest Rates: Current Trends and Future Predictions

Australian interest rates are a crucial factor shaping the nation’s economic landscape. They have a profound influence on everything from household budgets to business investments, making them a topic of keen interest for economists, policymakers, and everyday Australians alike. The Reserve Bank of Australia’s decisions on interest rates ripple through the economy, affecting inflation, employment, and overall financial stability.

This article delves into the current state of Australian interest rates and explores the factors driving these rates. It examines the impact of interest rates on various sectors of the economy, including their relationship to mortgage rates. The piece also looks at future predictions for interest rates in Australia, considering economic indicators and global trends. By understanding these dynamics, readers can gain valuable insights into the forces shaping Australia’s financial future.

Current State of Australian Interest Rates

The Reserve Bank of Australia (RBA) plays a crucial role in shaping the nation’s interest rate landscape. The RBA controls the cash rate, which has a significant influence on other interest rates in the economy ^[1]. This cash rate affects various aspects of financial life, from loan charges to savings returns, and has an impact on economic activity through its influence on spending and investment decisions ^[1].

RBA Cash Rate

Currently, the RBA’s cash rate is at its highest point in the past 11 years ^[2] This elevated rate has far-reaching effects on the Australian economy, influencing both borrowers and savers.

Home Loan Rates

The impact of the cash rate on home loan interest rates is substantial. As of June 2023, the average interest rate for owner-occupied variable rate home loans stood at 6.24% for outstanding loans and 5.94% for existing loans ^[3. This difference in rates is primarily due to varying loan-to-value ratios (LVRs), with lower LVRs typically resulting in lower interest rates ^[3] .

Interestingly, home loan rates vary across Australian states. In 2023, New South Wales had the highest average home loan interest rate at approximately 5.99%, while Queensland’s average rate was around 5.87% ^[4}.

Savings Account Rates

The elevated cash rate has had a positive effect on savings account returns. Many financial institutions are offering competitive base interest rates to attract customers ^[2]. Some banks provide bonus introductory rates, which are higher “honeymoon rates” that typically last for a few months before reverting to a lower base rate ^[2].

Additionally, some institutions offer bonus conditional rates, where customers need to meet specific conditions to receive higher interest each month. These conditions may include regular deposits, no withdrawals, or a certain number of card purchases ^[2] .

In conclusion, the current state of Australian interest rates reflects a complex interplay between the RBA’s monetary policy, home loan rates, and savings account offerings, all of which have significant implications for the broader economy.

Factors Influencing Interest Rate Decisions

The Reserve Bank of Australia (RBA) considers various factors when making interest rate decisions. These decisions have a significant influence on the economy, affecting everything from household spending to business investments ^[1].

Inflation

Maintaining low and stable inflation is crucial for sustainable economic growth and employment ^[1]. The RBA uses the Consumer Price Index (CPI) to measure inflation, which tracks the cost of goods and services over time ^[5]. When inflation is high, the RBA typically raises interest rates to reduce consumer spending and stabilise prices ^[5].

Employment

The RBA aims to achieve full employment, recognising that some unemployment is inevitable due to skill mismatches or job transitions ^[1}. When economic growth is slow, the RBA may lower the cash rate to stimulate growth and employment. Conversely, if growth is too rapid, they may raise rates to dampen economic activity ^[1].

Economic Growth

The RBA must balance its objectives of price stability and full employment. The flexible inflation target allows the RBA to address short-term trade-offs between economic growth, employment, and inflation ^[1]. The neutral interest rate, which aligns saving and investment at a level consistent with full employment and stable inflation, has declined over the past decade ^[6].

Global Financial Conditions

Global factors, such as the aftermath of financial crises, low corporate investment, and sustained low inflation, have influenced monetary policy settings worldwide ^[6]. These global conditions have a material impact on Australia’s policy interest rate. Additionally, the interplay between domestic and international interest rates affects capital flows and the Australian dollar’s exchange rate ^[6].

Impact of Interest Rates on the Australian Economy

Interest rates have a profound influence on various aspects of the Australian economy, shaping everything from housing prices to business investments. The Reserve Bank of Australia’s decisions on interest rates ripple through different sectors, affecting both households and businesses.

Housing Market

Interest rates have a significant impact on the housing market. Lower interest rates tend to support asset prices, including housing, by encouraging demand ^[7]. This occurs because the present discounted value of future income is higher when interest rates are lower ^[7]. Additionally, higher asset prices increase the equity available for banks to lend against, making it easier for households to borrow ^[7].

The relationship between interest rates and housing prices is complex. A 200 basis point increase in interest rates could potentially lower real housing prices by around 15% over a two-year period ^[8]. However, the Australian housing market has shown resilience despite higher interest rates. From May 2022 to November 2023, home values rose by 4.6%, even as the cash rate increased ^[9].

Consumer Spending

Interest rates have a significant effect on consumer spending. Lower interest rates can lead to higher consumption as households generally spend some share of any increase in their wealth due to higher asset prices ^[7] . However, Australian households are currently saving less than their global peers as mortgage repayments and tax bracket creep eat into disposable incomes ^[10].

Business Investment

There is a strong inverse relationship between interest rates and business investment. A 1% decrease in the interest rate paid on debt is associated with the investment rate rising by ¼–½ percentage points, on average ^[11]. However, this relationship varies across companies. Since the global financial crisis, the spread between the rates paid by companies at the top and bottom of the distribution has widened ^[12]. Borrowing rates for a large portion of companies, including smaller and riskier ones, have remained high in recent years, despite falls in the cash rate ^[12].

Future Predictions for Australian Interest Rates

Short-term Outlook

The Reserve Bank of Australia (RBA) has signaled a cautious approach to interest rates in the near future. While further rate tightening hasn’t been ruled out for 2024, the central bank is closely monitoring domestic demand, macroeconomic data, and global economic developments ^[13]. The recent uptick in inflation has raised concerns, with May 2024’s Consumer Price Index (CPI) reaching 4.0%, surpassing forecasts of 3.8% ^[13] . This persistent inflationary pressure has led to speculation about potential rate hikes in the short term.

Long-term Projections

Looking ahead, major Australian banks and economists anticipate a shift towards rate cuts, albeit with varying timelines. According to a Finder survey, 44% of economists predict rate cuts this year, while 38% expect them in 2025 ^[13]. The big four banks’ forecasts for the cash rate by the end of 2025 range from 3.10% to 3.60% ^[13]. These projections align with the OECD’s long-term forecast, which suggests a decline in rates throughout 2024-25, potentially reaching 3.4% by the end of 2025 ^[13].

Potential Risks

Several factors could influence future interest rate decisions. The RBA describes the economic outlook as “highly uncertain” ^[13]. Downside risks include potential global economic downturns, conflicts, or catastrophes that might impact Australia’s terms of trade and import costs ^[13] . Additionally, the performance of the Chinese economy, given its stressed property market and high youth unemployment rate, poses a significant risk to Australia’s economic stability ^[13]. These factors could potentially lead to a reassessment of monetary policy and impact the trajectory of interest rates in the coming years.

Conclusion

The complex interplay between Australia’s interest rates, economic indicators, and global trends shapes the nation’s financial landscape. The Reserve Bank of Australia’s decisions on the cash rate have a considerable influence on various sectors, from housing to business investments. This ripple effect extends to mortgage rates, consumer spending, and overall economic growth, highlighting the far-reaching impact of monetary policy on everyday Australians.

Looking ahead, the future of Australian interest rates remains uncertain, with potential shifts influenced by domestic and international factors. While short-term predictions suggest caution, long-term projections point towards a possible easing of rates. As the economic situation continues to change, policymakers, businesses, and individuals alike must stay informed and adaptable to navigate the evolving financial environment. The relationship between the cash rate and mortgage interest rates will likely continue to play a crucial role in shaping economic trends and household financial decisions.

FAQs

What are the projected interest rates in Australia for the next five years?

The OECD predicts a decrease in long-term interest rates in Australia, forecasting a drop to 3.4% by the end of 2025. This projection is in comparison with rates from the G7 economies.

Is there an expected decrease in Australian interest rates by 2024?

Interest rates in Australia are not anticipated to decrease until 2025. The Reserve Bank has maintained its current cash rate, citing persistently high inflation as the reason for the decision.

What are the expected interest rates in Australia over the next five years?

According to ING’s forecast, interest rates in 2024 are expected to start at 4% and are projected to decrease gradually throughout the year, reaching 3.25% by the end of 2024. For 2025, a further reduction to 3% is anticipated.

What is the forecast for interest rates in 2024?

Fannie Mae’s July Housing Forecast predicts that the average 30-year fixed mortgage rate will be around 6.7% at the end of the year, slightly down from 6.8% in the third quarter. The average mortgage rate for 2024 is expected to be 6.8%, decreasing to 6.4% in 2025.