Australia’s Property Market Splits in Two as Rates Bite

What Happened This Month

Cotality’s Home Value Index fell 0.4% nationally in June 2026, the steepest monthly decline since December 2022, driven almost entirely by Sydney and Melbourne Broker Daily. Every other capital told a different story: Perth, Brisbane and Adelaide all kept climbing, continuing a multi-speed pattern that has now persisted for months. Behind the price data, rental supply stayed historically tight nationwide and the Reserve Bank held its cash rate steady, though bank economists are increasingly split on where it goes next.

The RBA lifted the cash rate three times through February, March and May, adding 75 basis points to reach 4.35%, then held at that level through its June meeting. The minutes were read as hawkish by CBA and ANZ, while NAB maintains the cycle has already peaked. That disagreement has since widened: Bendigo Bank flagged one more possible 2026 hike, CBA has pencilled in the first rate cuts for 2027, and Westpac remains the lone forecaster tipping two further hikes to 4.85% by September The Adviser. The RBA’s next meeting is 11 August 2026.

Sydney

Sydney led the national decline, falling 1.2% in June and sitting among the most affordability-stressed capitals in the country, with an income-to-mortgage ratio of 40.4% PropertyUpdate. Auction clearance has stayed below 50% for three straight weeks, with the latest reading at 51.6% The Adviser. Sydney’s median dwelling value stood at $1,282,020 in the most recent published Cotality index, still the highest of any capital by a wide margin Cotality.

Rents have not followed prices down. Domain’s June quarter data put Sydney’s median house rent at a record $850 a week, up 6.3% over the quarter and 7.6% over the year Australian Broker. Falling values alongside rising rents is unusual, and it points to a market where the cost of servicing a purchase and the cost of renting are moving in opposite directions at the same time.

Melbourne

Melbourne fell 1.0% in June, extending a run that has now pushed values 2.9% below their November 2025 peak. Estimated home sales over the three months to May were tracking 14.2% below the same period a year earlier, the largest drop of any capital, alongside rising advertised stock giving buyers more choice and more leverage Cotality. Auction clearance sat at 54.5% in the most recent week, the strongest of the two largest capitals despite the falling values The Adviser.

Melbourne remains the most affordable of the mainland east-coast capitals, with a median dwelling value of $812,621, and it carries the highest gross rental yield of the major markets at close to 3.9%. For investors weighing entry points, that combination of a lower base value and comparatively stronger yield is worth discussing against Melbourne’s currently softer growth outlook.

Brisbane

Brisbane posted the second-strongest growth of any capital in June at 1.8%, yet recorded the weakest auction clearance rate in the country at 23.8%, the softest reading since the early pandemic period The Adviser. That combination, values rising while clearance collapses, suggests much of Brisbane’s remaining growth is being driven by private treaty and off-market sales rather than the auction system, which is thinner and less representative of the broader market than it is in Sydney or Melbourne. Brisbane’s median dwelling value now sits at $1,126,149, above Perth and second only to Sydney nationally.

Perth

Perth led all capitals in June, rising 2.5% and extending a five-year run that has lifted values 91.4%, by far the strongest of any capital over that period Cotality. Momentum has clearly eased from the pace seen earlier in the cycle, but Perth remains the standout performer of the current market split. Its median dwelling value of $1,050,354 is now within striking distance of Brisbane, a gap that would have seemed unlikely a few years ago.

Adelaide

Adelaide rose 1.2% in June, continuing a steadier, less dramatic growth pattern than Perth or Brisbane. Its median dwelling value has now moved past $945,000, up more than 11% over the year, with local reporting noting the average loan size in the city has roughly doubled from $350,000 to over $600,000 since 2017 Australian Broker. That scale of increase in typical loan size says as much about how much borrowing capacity has had to stretch as it does about the strength of the market itself.

Smaller Markets

Hobart and Darwin both continued to grow, up 0.9% and 1.5% respectively in the most recent reading, with Darwin’s annual growth of over 20% the strongest of any capital in the country over the past year Cotality. Canberra moved the other way, falling for a third straight month, down 0.6% in June and now 1.3% lower over the quarter, as rising listings met slower demand Canberra Times. Darwin remains the country’s most affordable capital by a clear margin, with a median dwelling value of $634,368.

Source: Cotality Home Value Index. Median values reflect the most recent published index; monthly movements referenced above are the more current June figures where available.

Rental Market Snapshot

Rental supply remains the tightest part of the market nationwide. SQM Research’s national vacancy rate held at 1.2% in May, unchanged year-on-year, with Brisbane, Perth, Adelaide, Darwin and Hobart all still recording vacancy rates below 1% SQM Research. National asking rents rose 7.8% over the year to mid-June, with Darwin, Hobart and Brisbane posting the strongest annual growth of any capital.

Darwin recorded the lowest vacancy rate in the country at 0.3%, alongside the fastest monthly rent growth nationally at 5.1% in a single month. Sydney and Melbourne, the two capitals with falling values, are also the two capitals with the highest vacancy rates in the country, though even those sit at 1.5% and 1.6% respectively, tight by any historical standard.

Lending and Finance Trends

National lending activity slowed through the March quarter, with new dwelling loan commitments down 6.2% in number and 3.8% in value, owner-occupier commitments down 6.9% in number, investor commitments down 5.3%, and first home buyer commitments down 4.3% ABS. More recent broker-network data suggests that pullback has accelerated since the May federal budget, with first home buyer and investor loan lodgements both down more than 20% across some networks in June compared with pre-budget levels.

Supply is not keeping pace either. Dwelling commencements fell 11.2% in the March quarter to 48,012, and only 197,340 homes were started in the 12 months to March, well short of the 240,000 a year needed to meet the Housing Accord target, with 243,864 dwellings currently under construction The Adviser. The negative gearing and capital gains tax reforms that passed Parliament in June, limiting negative gearing to new builds and replacing the capital gains discount with an indexed cost base from 1 July 2027, add a further layer of change for investors to plan around. Anyone weighing the tax implications of buying or restructuring before that date is best placed speaking with an accountant about their specific position.

What to Watch Next Month

The RBA’s 11 August meeting is the clearest near-term catalyst. Bank forecasts have not been this divided in some time, ranging from Westpac’s call for two more hikes to 4.85% through to CBA’s first pencilled-in rate cuts for 2027, and the outcome will shape both borrower sentiment and lender pricing through the rest of the year. The 29 July CPI release lands two weeks before that meeting and will carry unusual weight in shaping which side of that split the RBA leans toward.

The residential SMSF borrowing ban takes effect around 10 August 2026, and the run of lender activity ahead of that deadline, fee waivers, new commercial and SMSF white-label products, and hard cutoff dates, is likely to keep building through late July. Investors with an SMSF-held property purchase in progress should be confirming exchange timeframes now rather than closer to the deadline.

Auction clearance rates are worth tracking closely into spring. Three straight weeks below 50% nationally, with Brisbane at multi-year lows, suggests the market is still finding its footing, and a meaningful shift either way over the coming weeks would be a useful early signal for how the second half of the year plays out. Building approvals and commencements data for June, expected through late July and early August, will show whether the supply shortfall driving rental tightness is starting to close or continuing to widen.