New Cotality data gives some grim news - but it’s not ALL doom and gloom
Australia's property market recorded its slowest pace of growth in more than a year in April, with house values falling in Sydney and Melbourne as rising interest rates, surging fuel costs and the shadow of the Middle East conflict weigh on buyer confidence – and ANZ is warning the economic pain from all three forces is still in its early stages.
National home prices rose just 0.3% through April, the smallest monthly increase since January 2025, according to data from Cotality. The headline figure, modest as it is, masked sharper falls in the country's two largest markets: Sydney values dropped 0.6% for the month, taking the city's quarterly decline to 0.9%, while Melbourne also fell 0.6% – down 1.5% over the past three months.
Sydney's median dwelling value now sits at $1,292,157 while Melbourne's stands at $822,969, with both cities seeing values fail to keep pace with inflation over the past year.
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"There is now a clear indication that the momentum in the housing market has slowed," said Cotality's head of research for Australia, Gerard Burg. "We've obviously seen the impact of multiple rate rises with the likelihood of another one next month, we've seen the impact of inflation hitting the budgets of households, and the general uncertainty related to energy prices across the country."
A third rate rise looms large
The Reserve Bank has already lifted the official cash rate twice this year – in February and March – taking it to 4.1%. With headline inflation running at 4.6%, economists widely expect a further 25 basis point increase when the board meets next Monday and Tuesday.
ANZ's head of Australian economics, Adam Boyton, said a rate rise next week was likely given Wednesday's inflation data, and that the bank's base case was for the cash rate to then hold at 4.35%.
Cotality research director Tim Lawless said the compounding effect of the RBA's tightening cycle was cutting through clearly. The housing market had been losing momentum from late last year as affordability and serviceability constraints weighed on demand, and now, he said, "we have the additional downside pressure of higher interest rates, sentiment has fallen off a cliff and rising inflation is set to drive the cost of debt even higher."
Lawless said he would not be surprised if the national headline numbers moved into a modest decline over the coming months, especially if the RBA lifts again in May and follows up with a further increase.
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For brokers, this is a critical moment. A third consecutive hike would add a cumulative $300 a month to repayments on a $600,000 mortgage compared to the start of the year – a figure that is already biting into household discretionary budgets across the country.
Moody's, which assessed housing affordability in a report last month, found that affordability had worsened to 29.6% of average monthly disposable income in March 2026 – and that a further rate rise to 4.6% would push that measure above 31% without any relief from property price falls.
ANZ: the crisis is "still at the beginning"
The property data landed on the same day ANZ delivered its first-half results – a 6% increase in cash profit to $3.78 billion – and chief executive Nuno Matos used the occasion to sound an unusually direct warning about what lies ahead.
Matos said the bank was watching the economic impact of the Iran war closely, noting that ANZ, as Australia's most international bank, had a "front-row seat to global developments." He said the war had not yet triggered a material increase in customers entering hardship, but cautioned that it was too early to draw comfort from that.
"Much of the potential impact of this crisis remains ahead of us, but the longer the flow of oil is constrained, the greater the chance the crisis shifts from being primarily an inflation challenge, to much more a supply and growth challenge," Matos said.
"This crisis is still at the beginning, to be honest," he added on a call with analysts.
ANZ took a collective provision charge of $175 million for potential loan stress in the half, a move that followed Westpac pushing its credit impairment charge $150 million higher than expectations the previous week. While ANZ said there had been no material change in overall borrowing behaviour from either households or corporate customers, it confirmed it had increased its provisions in response to what Matos described as a "riskier economic backdrop."
Households, Matos said, were starting to feel the impact of higher transport costs, which would reduce money available for non-essential spending. He identified three indicators ANZ would be watching to gauge how deep the crisis penetrates: traffic on roads, discretionary spending, and whether large corporate customers were drawing on their credit lines.
The bank said it expected Australia to avoid a recession, but the language from Matos was notably more cautious than the result itself would suggest. ANZ's consumer confidence data, compiled with Roy Morgan, showed confidence sitting at about 64.3 – well below the monthly average of 108.9, and hovering near record lows.
"We've been seeing people have been feeling worse over the last couple of months compared to how they were feeling before COVID lockdown started," said ANZ economist Madeline Dunk.
A tale of two markets – and an opportunity for brokers
Not all markets are moving in the same direction. Perth continued to surge, with values up 2.1% in April alone – adding more than $21,000 to the median dwelling value in a single month, and lifting the city's annual gain to 26%. Brisbane (up 1.2%), Darwin (1.3%) and Adelaide (1.1%) all recorded solid monthly growth, supported by tight listings that are keeping supply constrained.
As MPA has previously reported, Australia's housing market has effectively split into two distinct tracks, with mid-sized capitals benefitting from inventory levels that remain significantly below historical averages. In Perth, the number of homes listed for sale is running 34% below average.
"For a lot of those smaller capitals that are still reporting very solid housing price growth, we know listings are very, very low," said ANZ's Dunk. "So that helps to keep those markets tight if there's not as much supply available."
In Sydney and Melbourne, the opposite is playing out. Auction listings have picked up over recent months, giving buyers more choice and, as Dunk noted, "potentially a bit more power in the market."
That shift is presenting a window for some buyers, particularly at the entry level. In Sydney, values for properties in the most affordable quarter – those priced up to around $900,000 – have actually increased 1.9% over the past three months, even as the top quarter of the market has retreated 3.1%. The divergence is creating what Domain chief economist Nicola Powell described as a "flight to quality" among buyers, with purchasers increasingly selective and only committing to the best available stock.
Regional markets have continued to outperform, with the combined regionals index up 4.2% in the first four months of the year – more than double the 1.8% lift across combined capitals. But Lawless cautioned that even regional momentum was beginning to slow.
What this means for your clients
For brokers managing clients in Sydney and Melbourne, the environment demands clear communication about serviceability in a world of rising rates. ANZ's own revised forecasts – as reported by MPA – expect Sydney prices to fall 0.7% and Melbourne prices to decline 1.7% across 2026 as a whole, before both cities potentially recover in 2027.
REA Group senior economist Eleanor Creagh has pointed out that if the RBA delivers the 125 basis points of tightening some economists now forecast for the year, it would amount to roughly a 10% reduction in borrowing capacity – a significant constraint for buyers at every price point.
Cotality's Burg offered some structural comfort: given the ongoing difficulty of adding to Australia's housing supply, he did not believe the country would see "large declines" in house prices. "While demand is softer, supply is picking up in terms of existing homes available for sale, there is a structural limit to the downside," he said.
That floor, however, may feel increasingly distant to clients watching their repayments climb and their property values slide. The job of the broker – explaining the landscape, managing expectations, and identifying opportunities in a fractured market – has rarely been more important.
