Housing downturn deepens as RBA rate reversal hits buyers
5 min
Australia’s housing market has weakened more sharply than the Reserve Bank anticipated, with higher interest rates, deteriorating sentiment and changing tax settings pushing the national market into reverse.
Reserve Bank governor Michele Bullock acknowledged the extent of the slowdown in a speech to the Anika Foundation Fundraising Lunch in Sydney on July 28.
Housing conditions had “eased by more than we had anticipated in May”, she said, after the Bank expected its interest-rate increases to take some heat out of the market.
Bullock attributed the larger-than-forecast slowdown to several forces, including recent housing policy developments and a broader deterioration in market sentiment.
The latest Cotality Home Value Index illustrates the change. National dwelling values fell 0.4% in June, the largest monthly decline since December 2022, taking values 0.7% lower over the June quarter.
The combined capital-city index fell more heavily, declining 0.6% in June and 1.3% over the quarter. Regional values continued to outperform, rising 0.3% for the month and 1.1% over the three months to June.
Sydney and Melbourne lead the falls
The downturn remains concentrated in the country’s two largest housing markets.
Sydney dwelling values fell 1.2% in June and 3.2% over the quarter. By the end of the month, values were 3.7% below their January 2026 peak.
Melbourne values declined 1% in June and 2.6% over the quarter, leaving the market 4% below its March 2022 peak. Melbourne was also the only capital to record an annual decline, with values down 0.9% over the year to June.
Canberra fell 0.6% for the month and 1.3% over the quarter, taking values 2.9% below their May 2022 high. Hobart, despite rising 0.6% in June, remained 0.7% below its March 2022 peak.
Conditions were markedly different elsewhere.
Brisbane values rose 0.3% in June, Adelaide was unchanged, Perth gained 0.7% and Darwin climbed 1.4%. All four remained at record highs at the end of June.
| Capital | June change | June-quarter change | Change from peak |
|---|---|---|---|
| Sydney | -1.2% | -3.2% | -3.7% |
| Melbourne | -1.0% | -2.6% | -4.0% |
| Brisbane | +0.3% | +1.3% | At peak |
| Adelaide | 0.0% | +1.3% | At peak |
| Perth | +0.7% | +2.0% | At peak |
| Hobart | +0.6% | +1.4% | -0.7% |
| Darwin | +1.4% | +5.0% | At peak |
| Canberra | -0.6% | -1.3% | -2.9% |
The figures reveal a divided national market rather than a uniform correction. Sydney and Melbourne are falling comparatively quickly, but strong annual gains remain intact in Brisbane, Perth, Darwin and Adelaide.
Perth values were still 23.9% higher over the year to June, while Darwin was up 19.8%, Brisbane 17.4% and Adelaide 11.6%.
Even Sydney remained 0.3% higher over the year despite its recent decline.
Bullock consequently characterised the pullback in established home prices as “modest” following a period of strong growth. She noted that Sydney and Melbourne values remained around the levels recorded before the RBA began raising rates again in February.
Buyers regain leverage
The weakness extends beyond headline prices.
Cotality estimated that capital-city sales over the three months to June were 16.2% lower than a year earlier and 14.5% below the five-year average for that time of year.
Advertised supply across the capitals was almost 11% higher than a year ago, while the combined capital-city auction clearance rate had remained below 50% since late May before falling into the low-40% range from late June.
Cotality research director Tim Lawless said the accumulation of available homes was primarily a symptom of weaker demand rather than a surge in new listings. Buyers had more properties to choose from, less urgency and greater negotiating power.
Affordability was already constraining demand before the latest interest-rate increases. Higher mortgage costs, cost-of-living pressures, pessimistic consumer sentiment and proposed federal changes affecting property investment have since added to the slowdown.
The result is likely to be a gradual decline rather than a severe national correction. Population growth, tight rental markets and limited new housing supply continue to support values, but they are increasingly being offset by weaker confidence and reduced borrowing capacity.
The RBA has erased all three of last year’s cuts
The speed of the housing slowdown becomes clearer when placed against the sharp reversal in monetary policy.
The RBA cut the cash rate three times in 2025:
- From 4.35% to 4.10% in February
- To 3.85% in May
- To 3.60% in August
Those reductions delivered 75 basis points of easing as inflation appeared to be returning sustainably to the Bank’s 2–3% target range.
The direction changed abruptly in 2026 after inflation accelerated and the economy was judged to be operating with greater capacity pressure than previously thought.
The RBA increased the cash rate by 25 basis points in February, March and May, lifting it from 3.60% to 4.35%. Those three increases have exactly reversed the 75 basis points of relief delivered last year.
The Board left the rate unchanged at its June 16 meeting, meaning the cash rate has been at 4.35% since May 5.
Higher mortgage rates and tighter lending assessments have reduced the amount many households can borrow, while also increasing repayments for existing variable-rate borrowers. The effect has been particularly visible in Sydney and Melbourne, where values are high and buyers are more sensitive to changes in borrowing capacity.
Bullock said the housing slowdown had gone further than the RBA forecast in May, but borrower distress remained contained. Fewer than 1% of borrowers were in negative equity, she said, and only a small proportion of that group was estimated to be experiencing severe repayment difficulty.
The labour market has also softened more than expected, with unemployment rising further than the Bank forecast. That creates a more complicated decision for the Board: inflation remains too high, but the effects of its previous tightening are becoming clearer across employment, household confidence and housing.
Bullock nevertheless reiterated that the Board was prepared to increase the cash rate again if required to meet its mandate.
The Big Four are divided over what comes next
The major banks agree that meaningful rate relief is unlikely in the immediate future, but they differ sharply over whether the RBA has finished raising rates.
Commonwealth Bank expects the cash rate to remain at 4.35% for the rest of 2026. Its economists have pencilled in the first cut for May 2027, followed by another in August, which would reduce the rate to 3.85%.
NAB also believes the next move is likely to be down, although it has expressed less confidence about the timing. Its forecast has the cash rate ending 2027 at 3.60%, implying three quarter-point cuts over the year.
ANZ’s July base case is for the RBA to remain at 4.35% until the second half of 2027. Its economists have not ruled out another increase in November if inflationary pressure intensifies. ANZ’s previously published central forecast included two cuts during 2027, taking the rate to 3.85%.
Westpac remains the outlier. Its July outlook anticipates two further rate increases during 2026, which would lift the cash rate to 4.85%, before an easing cycle begins later. This more hawkish view reflects concern that persistent inflation and energy-related cost pressures could require the RBA to tighten policy again.
| Bank | Expected 2026 direction | Expected easing |
| CBA | Hold at 4.35% | First cut forecast for May 2027; second in August |
| NAB | Hold; next move expected to be down | Cash rate forecast to end 2027 at 3.60% |
| ANZ | Hold at 4.35%, with a November hike risk | Base case has easing beginning in the second half of 2027 |
| Westpac | Two further hikes, potentially reaching 4.85% | Easing expected only after the additional tightening cycle |
These forecasts are highly conditional. Inflation, employment, household spending and the international energy outlook could all materially alter the timing.
The June-quarter Consumer Price Index, due on July 29, will be central to the RBA’s updated economic forecasts ahead of its August 11 meeting.
A softer inflation result, combined with weakening employment and housing, would support the case for an extended pause. A stronger result—particularly in underlying inflation—would keep another increase in play.
For the housing market, even an extended hold would mean borrowers receive no early relief from the 2026 increases. Cotality expects momentum to weaken further, with expensive markets, investor-heavy areas and locations carrying elevated advertised stock among those most exposed.
Australia is not yet experiencing a broad housing collapse. Prices remain at record highs in half of the capitals, negative equity is rare and national values are still 7.3% higher than a year ago.
But the direction has changed. The RBA has removed all of last year’s rate relief, buyers have regained leverage and the country’s largest housing markets are now leading a downturn that has already proved deeper than the central bank expected.
For Central Element, the start of work at Pearl represents another step in the company’s growing eastern suburbs pipeline.
All three vehicles will form part of a broader charitable initiative benefiting Big Brothers Big Sisters of America, the American Red Cross and Starlight Children’s Foundation
Jack Freeman believes the most compelling interiors are not decorated, but collected. The FREEMAN & CO founder creates layered, personal spaces shaped by art, travel and craftsmanship.
4 min
For Jack Freeman, a compelling interior should not look as though it was completed in a single shopping trip.
The founder and designer behind FREEMAN & CO prefers rooms that develop through art, travel, commissioned furniture and objects collected over time. It is an approach that treats the home less as a decorative project and more as an evolving portrait of its owner.
“I am a true believer in collecting versus decorating,” Freeman says.
That distinction underpins the international practice he has built across private residences, hotels, property developments, yachts and private aviation. Its projects stretch from Point Piper, Vaucluse, Circular Quay and Toorak to Mayfair, Bel Air and the Caribbean.
Although the locations and architecture vary considerably, the work is connected by a restrained design language. Natural stone, warm timbers and sculptural furniture establish the foundation, while art, bespoke lighting and individual objects give each interior its identity.
The objective is not to overwhelm a room with obvious symbols of expense. It is to create an environment that feels calm, layered and particular to the people living within it.
“The greatest luxury isn’t about excess,” Freeman says. “It’s about creating an oasis where you come home and feel immediately grounded — effortlessly chic and deeply personal.”
Collecting instead of decorating
Decorating can imply the completion of a room: selecting the required furniture, filling the available walls and producing a coherent finished image.
Collecting is less conclusive.
A collected interior has room to change as its owners travel, discover artists, inherit pieces or reassess how they use their home. Its character comes from the relationship between objects rather than adherence to a single brand or season.
That does not mean placing unrelated pieces together without discipline. The designer must understand scale, proportion, material and provenance well enough to create a dialogue between them.
A contemporary artwork might sit beside a historic piece of furniture. A precisely detailed new interior may be interrupted by an irregular object made by hand. Smooth stone can be balanced by timber, textiles or a patinated metal surface that becomes richer with age.
The tension between those elements is part of the appeal.
For Freeman, art is not an accessory to be added once the furniture plan is complete. It forms part of the architecture and atmosphere of the room from the beginning.
Lighting is considered in the same way. Beyond its practical purpose, a bespoke fitting can operate as a suspended sculpture, changing both the room’s composition and the way its materials are experienced after dark.
A design perspective shaped by travel
International travel plays a significant role in Freeman’s creative process.
Design fairs such as PAD Paris and Salone del Mobile in Milan provide opportunities to encounter emerging designers, established galleries, new materials and collectible furniture away from the filter of social media.
More spontaneous discoveries can prove equally important.
“Sometimes it’s the simple things,” Freeman says. “That piece found on a shopping trip with a client in Paris, stumbling across an artisan’s workshop, or a special memory that forms the narrative of the story.”
Objects selected during travel bring more than visual interest into a home. They carry an association with a place, maker or experience, giving the client a connection that cannot be reproduced by ordering an entire interior from a catalogue.
Freeman’s influences are international, but his projects are not conceived as replicas of Parisian, Milanese or Californian style. Each commission responds to its architecture, setting, natural light and the daily lives of its occupants.
A waterfront Sydney residence demands a different treatment from a Mayfair townhouse. A Caribbean estate shaped by brutalist architecture and reflecting pools calls for another response again.
The designer’s role is to absorb those references without allowing them to overwhelm the individual qualities of the property.
Designing the complete experience
FREEMAN & CO extends beyond conventional interior decoration.
The practice’s stated services include interior design and architecture, project management, property acquisition, development advice, concept design, documentation, furniture and lighting design, procurement and art curation.
That breadth allows the team to become involved before a room’s dimensions and finishes are fixed.
Early participation can be important at the top end of the residential market, where architecture, landscape, interiors, technology and art must operate as one environment. Decisions about ceiling heights, wall dimensions, sightlines and lighting can directly affect where art is installed or how custom furniture is proportioned.
The practice can then carry those decisions through to procurement and final installation, maintaining the design narrative as a project moves between architects, builders, specialist craftspeople, dealers and suppliers.
Its residential portfolio includes a South Coast retreat conceived as an escape from urban life, a Caribbean estate with reflecting pools, an East Coast-inspired Palm Beach residence and a Mayfair townhouse organised around an expressive drawing room.
The studio also says it has worked on highly tailored Sydney residences with values exceeding $100 million, although the private nature of such commissions means individual addresses and clients are not always disclosed.
A home that can keep changing
The risk in creating a perfectly resolved interior is that it can become too static — a composition that looks exceptional in photographs but leaves little room for life.
Freeman sees the home as something that should evolve with its owners.
“I love the evolution of design,” he says. “We are talking about people’s lives, and as they evolve, so too should their private sanctuaries.”
That evolution might involve adding art, reupholstering a significant piece, adapting rooms as a family changes or making space for objects gathered through future travels.
The original design needs to be strong enough to accommodate those layers.
This may be the clearest expression of Freeman’s approach to luxury. It is not simply access to rare stone, collectible furniture or commissioned craftsmanship. It is the creation of a personal environment whose meaning deepens rather than diminishes with time.
Fact box
- Designer: Jack Freeman
- Role: Founder and managing director
- Practice: FREEMAN & CO
- Base: Australia, with international projects
- Project locations named by the practice: Point Piper, Vaucluse, Circular Quay, Toorak, Palm Beach, the NSW South Coast, Mayfair, Bel Air and the Caribbean
- Sectors: Private residences, hotels, residential developments, private aviation and superyachts
- Services: Interior design and architecture, property development, project management, property acquisition, documentation, furniture and lighting design, FF&E procurement, interior dressing and art curation
- Design philosophy: Collected, personal interiors shaped by art, craftsmanship, travel and enduring materials
- Website: free-man.co
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