Australia's home price growth has hit a wall. National prices were essentially flat in May, declining just 0.04% for the month after a 0.1% fall in April, with the national median dwelling value sitting at $908,000 — up 7.5% on a year ago but losing momentum.
"Home price growth has clearly stalled as the effects of this year's consecutive rate hikes flow through," REA Group senior economist Angus Moore (pictured) said.
The RBA lifted the cash rate to 4.35% on 5 May — the third consecutive increase this year — effectively unwinding all of last year's relief and directly tightening borrowing capacity for new and refinancing borrowers.
The combined capital cities recorded a 0.1% fall in May, while regional areas continued to grow at 0.2% for the month — though even that represented the slowest regional growth pace since 2023.
Sydney and Melbourne have now recorded three consecutive monthly price falls, each down 0.2% in May. Moore noted the declines remain modest — prices in both cities are only 1.2% below their March peak — but the trend is now broadening.
"The slowdown has not been confined to Sydney and Melbourne," Moore said. "Brisbane, Perth and Adelaide have clearly slowed, after an extremely strong 2025."
Perth's result was particularly notable — down 0.1% in May, its first monthly decline since late 2024, ending an extraordinary run of growth. Despite the dip, Perth prices remain 20.6% higher than a year ago. Brisbane and Adelaide both recorded positive monthly results but at their slowest pace of growth since late 2022 to early 2023. Adelaide and Darwin were the best performing capitals in May, each up 0.3%. Canberra was the weakest performer, falling 0.4% for the month.
Auction data corroborates the softening picture. Clearance rates have dropped to around 51% in Sydney, 55% in Melbourne and 37.2% in Brisbane — levels matching or falling below those recorded during the 2022 downturn, according to Domain.
The forward indicators point in the same direction. Moore flagged at least one further rate hike expected in 2026, alongside some pullback in investor demand following the budget's negative gearing and CGT changes.
"With at least one further rate hike expected in 2026, and some pullback in investor demand post-budget, prices are likely to continue to be soft," he said.
The key supports holding the market up are a resilient labour market, strong household equity buffers limiting forced sales, and persistently high construction costs and supply constraints keeping new home volumes in check.
"Price declines are unlikely to be large," Moore said.
Industry sentiment reflects that caution. An independent survey of property experts conducted by Herron Todd White found that approximately 84% do not expect the federal budget to deliver meaningful improvements to housing supply or affordability outcomes nationwide.
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