RBA Signals Add Strain to Australia Housing

Reserve Bank of Australia assistant governor Sarah Hunter told the AFR Property Summit that the central bank may have to raise interest rates further to control inflation. She highlighted that inflation remains the RBA’s top priority, signalling that monetary policy is likely to stay tight even as the housing market weakens.

Hunter also noted that recent interest rate increases have already exerted downward pressure on the housing market. Her comments suggest policymakers are aware of the strain on property but remain focused on ensuring inflation returns to target, even if that means additional headwinds for housing.

Recent official-valuation data show that total Australian home values fell by A$34 billion in the June quarter, a 0.3% decline. The figures indicate that the impact of higher borrowing costs is filtering through into overall property valuations across the country.

Within that national picture, New South Wales recorded a particularly large nominal fall, with home values down about A$92.9 billion over the same period. The size of the decline in that state underscores the scale of adjustment in one of Australia’s most expensive and heavily leveraged housing markets.

Market activity has softened alongside the fall in values. Data from the week ending 7 September show 1,462 auctions were held across the combined capital cities, which is 31.1% fewer than in the same week a year earlier. The reduction in volumes points to a more cautious approach from sellers and agents at the start of the spring selling season.

The same data set reported a preliminary combined-capitals clearance rate of 52.7%. This level indicates that a significant share of properties taken to auction are not securing a sale under the hammer, consistent with a market where buyers are more price-sensitive amid higher interest rates.

Taken together, the RBA’s commitment to prioritising inflation control and the observable declines in home values and auction metrics depict a housing sector under mounting pressure. Recent rate hikes have already contributed to weaker prices and activity, and the prospect of further tightening keeps uncertainty elevated for buyers and sellers.

The combination of reduced valuations, softer auction conditions and the possibility of additional rate increases suggests that the housing adjustment may continue as long as monetary policy remains restrictive. For now, the data indicate that interest-rate settings are a central driver of the current downturn in Australia’s property market.