Home prices in Australia’s capital cities fell in May 2026, marking the first decline since January 2025. The drop reversed gains seen earlier in the year, including in lower-priced homes across Sydney, Melbourne, and Canberra, whose median house prices ended May below their levels at the end of 2025.
Nationally, home prices were flat in May 2026 as rising values in Brisbane, Perth, Adelaide, Hobart, and Darwin offset metropolitan losses, though the pace of growth in those cities slowed. The number of homes listed for sale increased across most Australian cities during the month, while the number of sales decreased.
Auction activity weakened, with a preliminary clearance rate of 54.5% in the final week of May 2026—the lowest of the year. Finalized clearance rates are typically lower than preliminary figures, suggesting the rate may reach its lowest point since the 2020 lockdowns.
Tim Lawless, research director at Cotality, said the May decline could signal the start of a year-long downturn that may eventually extend to smaller cities that previously experienced price booms. He described a 10% national price drop as reasonable, noting that home values had risen about 35% over the prior five years. Lawless added that the housing market is unlikely to recover until interest rates begin to fall, possibly in the second half of 2027.
The Reserve Bank of Australia raised interest rates to 4.35% by February 2026, matching 2024 highs, and is not expected to cut rates until late 2027 at the earliest. Financial markets anticipate another rate hike in 2026 as inflation is projected to reach 4.8% by June. Economists have cited high interest rates, federal tax reforms, and reduced household confidence as factors behind the expected modest price decline in 2026.
Housing Minister Clare O’Neil stated in a television interview that the government’s proposed tax changes for property investors are not the main driver of falling prices. “The biggest driver of house prices is interest rate movements,” she said. O’Neil added that renters would have a better chance of buying homes due to the reforms and urged Australians to rely on renter advocacy organizations with decades of experience, all of which support the government’s housing policies.
Despite falling home prices in major cities, advertised rents rose at least 0.6% per month nationwide in 2026, resulting in a 5.9% annual increase. The national rental vacancy rate held at 1.5% in May 2026, matching record lows recorded in 2022 and 2023.