House values fall in Sydney and Melbourne amid interest rate rises

New figures show thousands of dollars have been wiped from the value of homes in Sydney and Melbourne; Even before the Federal Reserve’s second interest rate hike started affecting homebuyers, the country’s real estate market was slowing.

As the Central Bank prepares to give mortgage holders and buyers a third interest rate hike this year, figures from Cotality show values falling in the country’s two biggest property markets while easing in other capitals.

House values are falling in Sydney and Melbourne and slowing in the rest of the country.Dion Georgopoulos

During April, house values in Sydney fell 1.2 per cent, down 0.7 per cent since the start of the year. In the last 12 months, there has been an increase of 4.4 percent, in line with the city’s inflation rate in the same period.

Sydney’s median home value fell by nearly $7000 to $1.6 million.

Despite the slowdown, Sydney’s total house values have increased by 21.4 per cent over the past five years.

In Melbourne, house values have fallen 2.2 per cent since the start of 2026, down 0.8 per cent. Last year, home values failed to keep pace with inflation, rising 2.5 percent compared to the city’s consumer price index of 4.6 percent.

The city’s median home value fell almost $5,000 to $972,000.

Melbourne’s house values have increased by just 5.8 per cent since the start of 2021, improving affordability for those looking to enter the market.

Tim Lawless, research director at Cotality, said values across the country had risen by 0.3 per cent in the year to April, the smallest rise since January last year, just before the Reserve Bank started cutting official interest rates.

He said falling demand and the collapse in consumer confidence, as well as the Reserve’s back-to-back interest rate hikes, would continue to negatively impact the property market.

“The housing market had been losing momentum since late last year as affordability and serviceability constraints put pressure on demand.”

“We now face additional downward pressure from higher interest rates, sentiment has fallen off a cliff and rising inflation will push the cost of debt even higher.”

The strongest market throughout April continued to be Perth, where values rose 2.1 per cent, up 25.7 per cent over the last 12 months. Perth’s median house value is now just under $1.1 million, matching Sydney’s during the global financial crisis.

In some Perth suburbs, values have risen by more than 30 per cent in the past year.

Values increased in Brisbane (up 1.2 per cent), Darwin (1.1 per cent) and Adelaide (1 per cent). While Brisbane’s average value reached $1.2 million, Adelaide joined the $1 million club.

Home values in Canberra fell 0.1 per cent last month but were still up 7 per cent on last year to $1.05 million.

Lawless said there is a significant difference in price change between the upper end of the market and the entry level. In Sydney, the values of the most expensive properties fell by 3.3 percent, while the values of the cheapest properties increased by 3.3 percent.

While regional values have increased by 4.2 percent since the beginning of the year, this rate in the country’s capitals has been 1.8 percent.

But even regional values are starting to slow down, Lawless said.

This slowdown could deepen into May, as most economists expect the Central Bank to raise the official cash interest rate from 4.1 percent to 4.35 percent at its meeting next Monday and Tuesday.

In addition to the February and March increases, further rate increases would increase the $600,000 mortgage repayments by a total of $300 per month.

Adam Boyton, ANZ’s Australian economics chief, said a rate hike next week was likely given Wednesday’s inflation report, which showed prices had risen 4.6 per cent in the last 12 months.

He said the Central Bank’s board will likely be divided on whether to raise interest rates, and that steering the outlook will become more difficult given the economic fluctuations created by the war against Iran.

“Assuming we see a rate hike next week, our view remains that the cash rate will remain at 4.35 percent,” he said.

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