Home prices flatline, but no such joy for renters
House prices are falling in Australia’s two largest cities as higher interest rates and investor tax changes put pressure on an already weak market.
House values fell 0.9 per cent in Sydney, 0.8 per cent in Melbourne and 0.2 per cent in the ACT in May, according to data published by research agency Cotality on Monday.
While prices rose in other state and territory capitals, growth was weaker than previously seen.
Cotality research director Tim Lawless said some of the weakness was part of the normal house price cycle but other factors were also playing a role.
“Late last year, it was more about affordability and serviceability challenges as house prices outpaced incomes,” he told AAP.
“Then towards the end of last year we started to see inflation accelerating, the RBA took a more hawkish stance – which was a blow to confidence – and from there we’ve seen interest rates start to rise, the global oil shock and now the dismantling of a budget.”
Perth and Darwin recorded the strongest monthly price increases at 1.5 per cent, followed by Brisbane and Hobart at 0.9 per cent and Adelaide at 0.5 per cent.
While the average house price in Sydney is $1,282,020, in Melbourne this figure is $812,621.
Price growth was stronger outside capital cities; regional Western Australia leads with 1.9 per cent in May and 22.7 per cent annually.
Rents across the country increased by 0.6 percent in May; This is the same as April’s readings but slightly lower than the first three months of 2026.
The Cotality report warned that a very low national vacancy rate of 1.5 per cent – which means demand for rental properties is high – will continue to push up rents in the coming months.
Mr Lawless said the government’s decision to limit key investor incentives to new homes was likely to slow spending but it was too early to see a significant impact on national data.
“Looking ahead, we certainly expect there to be less investment in the housing market and we will see a downturn in overall transaction activity,” he said.
Auction clearance rates, considered a useful leading indicator of future property price rises, reached a “new cyclical low” following the announcement of the tax changes, according to separate Cotality data.
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