Australia’s property market is entering a critical phase. The Reserve Bank has held the cash rate at 4.35%, but Governor Michele Bullock has made it clear that another increase remains possible if inflation fails to ease sufficiently.
At the same time, major banks are forecasting further property price declines, mortgage applications are falling and concerns are growing about future housing supply.
RBA Keeps the Door Open to Another Rate Rise
After three rate increases this year, the RBA has chosen to hold at 4.35%. However, a rate cut was not discussed and the Bank remains prepared to tighten policy again if required.
Inflation remains above the RBA’s 2–3% target, meaning borrowing conditions could stay restrictive well into 2027.
Sydney and Melbourne Face Further Price Falls
Sydney and Melbourne remain at the centre of the downturn. Major bank forecasts vary, but both markets are expected to experience further weakness before eventually recovering.
ANZ expects Sydney house prices to fall 14.5% from their peak, with Melbourne potentially declining 12.8%.
Importantly, the RBA does not currently view falling property prices as a major threat to financial stability. Michele Bullock indicated that even a 20% decline would leave only around 5% of households in negative equity.
Mortgage Demand Is Falling
Higher rates, reduced borrowing capacity and changes to property taxation are also affecting buyer confidence.
Westpac reported mortgage applications had fallen 20% by the end of July compared with levels around the May Budget.
Fewer buyers and softer auction clearance rates are creating considerably more negotiating power for those who remain active.
Falling Prices, But a Longer-Term Supply Problem
There is another side to the downturn. Lower property values, higher construction costs and reduced investor confidence can weaken the incentive to build new housing.
That could further constrain supply and place additional pressure on rents, even while established property prices decline.
What This Means for Buyers and Sellers
For buyers with secure finance and a long-term outlook, weaker competition may create opportunities that were unavailable during stronger markets.
For sellers, accurate pricing is increasingly important. Waiting for yesterday’s price in today’s market can result in longer campaigns and missed buyers.
Rodney McLoughlin believes the key is separating short-term market sentiment from long-term property fundamentals. In uncertain markets, preparation, local knowledge and disciplined decision-making become even more important.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 14 August 2026.
Rodney McLoughlin is a trusted real estate professional with deep insights into the Australian property market. For personalized advice and market expertise, reach out to Rodney today.