Interest rates just hit their highest point since 2008. The RBA pushed the cash rate to 4.85% on November 3, 2026 — the fifth hike this year — and the vote was split 6-3, with three board members arguing to hold. Property values have been falling for seven straight months, but the story is different depending on which city you’re looking at. Here’s what you actually need to know.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The RBA’s November statement made it clear: inflation is forecast to stay above the 2–3% target band through most of 2027, and the board will do whatever it considers necessary to bring it back. That includes raising rates further if needed. But three of the four big banks — ANZ, CommBank, NAB and Westpac — all expect no more hikes in this cycle, with the first cuts pencilled in for the second half of 2027.
So we’re sitting at what looks like the peak, or close to it. The question is what that means for anyone buying, selling or holding property right now.
What the Rate Rise Means for Your Property Decisions
Let’s start with the direct impact. The RBA’s 0.25 percentage point hike in November adds roughly $92 a month to repayments on a $600,000 loan, assuming the banks pass it on in full. That’s about $1,100 a year. For someone who bought at the start of 2026, the cumulative hikes this year have added around $450 a month — roughly $5,500 a year — to the same-sized loan.
But the aggregate figures hide a fragmented market. National dwelling values are down 6.7% from the March 2026 peak, according to Cotality, and 97% of capital-city suburbs recorded falls in the three months to September. Yet asking prices nationally are still 3.3% higher for houses and 7.9% higher for units than a year ago, per SQM Research. That gap between what sellers want and what buyers will pay is exactly what you’d expect in a market where transaction volumes are low and confidence is shaky.
The real divide is geographic. Sydney houses have fallen 3.1% annually and Melbourne houses are flat, while Perth houses are still up 4.0% annually and Adelaide units have gained 10.0%. Domain’s FY27 forecast expects Sydney and Melbourne house prices to fall another 3–8% through to June 2027, while Brisbane, Adelaide and Perth keep setting records. This isn’t a national downturn — it’s a two-speed correction concentrated in the cities where buyers carry the most debt relative to their incomes.
And then there’s the Budget. From 1 July 2027, negative gearing on established residential properties will be restricted — rental losses can no longer offset salary or other income — and the 50% capital gains tax discount will be replaced by cost-base indexation with a 30% minimum tax on gains. If you bought your investment property before 7:30pm on Budget night, 12 May 2026, nothing changes. Newly constructed properties are fully exempt from both changes. The grandfathering provisions mean existing investors have a strong incentive to hold rather than sell, which could keep stock tight in desirable suburbs.
What’s Different About This Cycle
This cycle is different from 2022–23, when property prices kept rising through thirteen consecutive rate rises. Back then, the market absorbed higher rates because the structural drivers — population growth, chronic undersupply, rising national wealth — were strong enough to offset the drag. This time, in Sydney and Melbourne at least, those drivers have met their match. Borrowing capacity has been cut by almost $90,000 since the tightening began, and the Budget changes have added a layer of policy uncertainty that wasn’t there before.
But the structural forces haven’t disappeared. Australia’s residential property market is valued at $12.6 trillion, with $2.6 trillion in debt against it. Half of all homeowners have no mortgage at all. The accumulated housing shortage is conservatively estimated at 250,000 dwellings, and the government’s target of building 1.2 million homes over five years looks unlikely given construction cost rises and skilled labour shortages. That underlying deficit is why most analysts expect a recovery once rates start falling, not a crash.
How to Position Yourself in a Two-Speed Market
The practical question is what you do about it. The answer depends on whether you’re buying, selling, holding or looking to invest.
For buyers with finance approved
You have more leverage than at any point since 2020. Homes are taking longer to sell — median time on market has risen to 39 days, the highest since August 2020 — and vendor discounting has widened to 4.7%, the largest since May 2019. That means you have time to inspect, compare, do due diligence and negotiate on price and conditions. Extended settlements and repair clauses are back on the table in a way they weren’t during the boom. The catch is that borrowing capacity is constrained, so you need to be realistic about what you can afford at current rates, not at the lower rates the market might see in 2028.
For investors looking at established property
The Budget changes from July 2027 shift the calculation. If you’re buying an established investment property after that date, you won’t be able to offset rental losses against your salary — they’ll be quarantined against property income or future capital gains only. That makes cash-flow positive or neutral properties more attractive than they were when negative gearing could reduce your tax bill. The grandfathering of existing rules for properties bought before May 2026 means established investors who already own are sitting in a privileged position — selling would trigger a CGT event and lose that protection, which is one reason forced selling has been limited.
For investors looking at new builds
Newly constructed properties — including off-the-plan apartments and house-and-land packages — remain fully exempt from both the negative gearing restrictions and the CGT changes. That’s a deliberate policy signal from the government: they want investment capital flowing into new supply, not existing stock. The question is whether the numbers work at today’s construction costs and interest rates. Most new apartment developments aren’t financially viable at current market prices, which means the ones that do get built will need to sell at a premium — potentially pulling up values of established apartments in the same area over time.
For existing homeowners
If you’re on a variable-rate mortgage, the cumulative impact of 2026’s hikes is real. But the RBA’s Financial Stability Review notes that most borrowers remain financially resilient. Less than 1% of borrowers are estimated to be in negative equity, and the median mortgaged household has enough in redraw and offset accounts to cover more than a year of scheduled repayments at current rates. Only about 2% of variable-rate owner-occupier households have insufficient income to cover both mortgage payments and essential living expenses, and most of those have savings to cover the shortfall for at least six months. Even if housing values fell another 20%, the RBA estimates only about 5% of mortgages would move into negative equity. That’s why the feared wave of forced sales hasn’t materialised.
Where Investors Get the Current Market Wrong
The most common mistake I see is treating this as a uniform national downturn and waiting on the sidelines until prices clearly start rising again. History suggests that by the time you’re sure the recovery has begun, the best opportunities have already passed. Domain’s research on eight housing cycles since the mid-1990s found downturns lasted an average of eight months and reduced prices by 2.9%, while subsequent upswings lasted almost three years and delivered average gains of 32.3%. The current downturn has already run longer than the historical average in some cities, but that doesn’t mean it’s over — particularly if rates stay high or unemployment rises.
The second mistake is assuming falling prices mean bargains everywhere. Not every property that’s dropped in value is a good buy. The correction is exposing properties that were only carried by momentum — outer-suburban houses with weak local demand, investment-heavy developments with high vacancy risk, properties that need significant work in areas where renovation costs can’t be recovered. The properties that are genuinely worth buying in this market are the ones that would be good investments even if prices fell another 5–10%: well-located, A-grade homes in gentrifying inner and middle-ring suburbs with strong owner-occupier demand.
The third mistake is ignoring the rental side of the equation. National rents rose 5.5% over the year to September, and CBRE expects median apartment rents across capital cities to grow by 24% between 2025 and 2030. By 2030, 92% of two-bedroom apartments are forecast to have rents exceeding $700 a week, with a third exceeding $1,000 a week. Vacancy rates are expected to fall further, from 1.8% in 2025 to 1.1% by 2030. For investors who can get the purchase price right, the income side of the equation is improving at the same time that purchase prices are softening — that’s a combination that doesn’t come around often.
→ Scroll right to see all columns
| City | Lower Estimate | Upper Estimate |
|---|---|---|
| Sydney | -7% | -3% |
| Melbourne | -8% | -4% |
| Canberra | -4% | flat |
| Brisbane | +3% | +7% |
| Adelaide | +4% | +8% |
| Perth | +5% | +9% |
| Combined Capitals | -2.5% | +1.5% |
Frequently Asked Questions
Will the RBA cut rates in 2027? ▾
Is now a good time to buy property in Australia? ▾
How much have borrowing capacities been cut? ▾
What happens to negative gearing from July 2027? ▾
Are we heading for a housing crash? ▾
The Window That Won’t Stay Open Forever
The current market is uncomfortable — falling prices, high rates, low confidence, and a Budget that’s rewritten the rules for established property investors. But uncomfortable isn’t the same as broken. The structural drivers that have underpinned Australian property values for decades — population growth, chronic undersupply, rising national wealth — are still in place. What’s changed is the cost of debt and the tax treatment of established investments.
For buyers who can get finance and who focus on quality properties in locations with genuine long-term demand, this is a period of unusual leverage. For investors who understand that the Budget changes make new builds more attractive relative to established stock, there’s a clear directional signal. And for existing owners, the grandfathering provisions and low forced-selling risk mean the pressure to sell is mostly absent.
The recovery, when it comes, is likely to arrive faster than most people expect. That’s what happened after every previous downturn. The buyers who positioned themselves before the turn — not after — were the ones who benefited most. If this was useful, you might also want to read How Interest Rate Hikes Are Reshaping the Australian Property Landscape.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
Sources and Further Reading
Is It Better to Buy in a High-Demand or Emerging Suburb in Australia? — Explores the location decision that matters more than ever in a two-speed market.
Reserve Bank of Australia (2026). Monetary Policy Decision Statement, 3 November 2026. 🔗
Australian Bureau of Statistics (2026). Consumer Price Index, September 2026. 🔗
Australian Bureau of Statistics (2026). Labour Force Survey, September 2026. 🔗
Cotality (2026). Home Value Index, October 2026.
Domain (2026). FY2027 Housing Market Forecast, June 2026.
CBRE (2025). Apartment Vacancy and Rent Outlook, H2 2025. 🔗
