Australia’s housing market is showing early signs of a shift in momentum, with a sharp rise in listings, weakening price growth across major capitals and a gradual lift in distressed activity pointing to changing conditions, according to SQM Research.
SQM Research Managing Director Louis Christopher said the jump in listings was notable not just for its size, but for what it signals about the housing cycle.
“I kept noticing that the variation was narrowing and narrowing, and now we are recording this increase year on year,” he said.
New data for May shows total national property listings surged 10.4% to 258,803 dwellings, marking one of the strongest monthly increases in recent periods and pushing national stock into positive year-on-year territory for the first time in more than a year.
Mr Christopher said the latest monthly rise was expected, but still significant in context.
“The monthly spike of 10.4% was probably more than a little bit expected,” he said.
New listings rose 5.0% nationally and are now 12.0% higher than May 2025, suggesting vendor activity remains strong despite softer conditions emerging across key housing markets.
Older stock also climbed 10.5% over the month, reflecting properties taking longer to sell and growing divergence between buyer and seller expectations and Mr Christopher said this was consistent with a market adjusting in real time.
“When you look at the old listings that we have got there, and that is significantly on the rise, there is a whole bunch of vendors out there that are still overpricing their property compared to market,” he said.
“And hence the reason why we are seeing a big rise in old listings.”
Price momentum stalls across major capitals
While national asking prices were broadly flat, the underlying capital city trends reveal increasing weakness in the country’s largest markets.
Five of the eight capitals, including Sydney, Melbourne, Brisbane, Perth and Adelaide, recorded monthly declines in combined asking prices.
Sydney fell 0.3%, Melbourne declined 1.1%, Brisbane dropped 1.0%, Perth eased 0.8% and Adelaide was down 1.7%.
Mr Christopher said the national figure masked what was happening beneath the surface.
“The flat national price reading masks what is actually happening across the major capitals,” he said.
“Sydney, Melbourne, Brisbane, Perth and Adelaide all recorded monthly falls in combined asking prices. The only markets still rising are the three smallest.”
He said market conditions had changed significantly since the start of the year.
“When we started the year off, most capital cities, barring Sydney and Melbourne, were experiencing a strong seller’s market,” Mr Christopher said.
“But the market from about late February onwards started suffering from a series of shocks.”
According to Mr Christopher, those shocks included multiple interest rate rises, rising global energy costs linked to the Middle East conflict and recent property taxation changes that have weighed heavily on confidence.
“That has changed sentiment in the market big time,” he said.
Distressed listings rise as market pressure builds
Distressed listings rose 5.1% in May to 3,847 properties, although they remain 16.2% below the same time last year.
Queensland, Western Australia and South Australia all recorded increases of around 9%, while the ACT remains significantly elevated compared with a year ago.
Mr Christopher said the figures do not yet point to widespread mortgage stress but the trend is becoming harder to ignore.
“With 3,847 distress listings, that is below the long-term averages that we have been recording,” he said.
“The more long-term average is generally around 6,000 listings.”
However, he said the monthly movement was more important than the annual comparison.
“It has been falling and falling and falling, and then from about March it started to rise again,” Mr Christopher said.
“The annual figure is still negative, but year-on-year comparisons lag. The monthly trend is what matters here, and it is rising.”
‘A market losing momentum’
Mr Christopher said the combination of rising supply, weakening asking prices and increasing distressed activity points to a market that is losing steam.
“May’s data points to a market that is losing momentum,” he said.
“National listings recorded their strongest monthly rise in some time and have moved back into positive annual territory for the first time in over a year.”
“When supply returns this quickly while prices stall, it is usually an early sign that the market is at a turning point.”
He said the moderation that first appeared in Sydney and Melbourne is now spreading to markets that had previously led the nation in price growth.
“From where we were at the start of the year where states such as Queensland, Western Australia and South Australia were still recording very strong rises, that has all changed now,” Mr Christopher said.
“We still think Brisbane, Perth and Adelaide are going to record a positive year in terms of dwelling price increases, but nowhere near what it was going to be.”
“The truth is that for the calendar year, they may well record a positive increase. But for the second half of the year, we are likely to start seeing some housing price falls in those three cities.”
Mr Christopher said many sellers are responding to changing conditions, but others are still holding onto outdated price expectations.
“It is fair to say they are in the process of adjusting,” he said.
“A number of vendors have been listening to their agents and have already been adjusting as we have seen through the asking prices.”
“But there is still a percentage of vendors who are not willing to meet the market.”
He said this is a common feature of softer housing markets.
“In down markets, we see this all the time, just old listings stacking up upon each other because those vendors are not willing to meet market.”
What agents should watch next
Looking ahead, Mr Christopher said auction clearance rates and asking prices will be the clearest indicators of where the market heads next.
“Keep watching auction clearance rates. Keep watching what asking prices are doing,” he said.
He also pointed to the Reserve Bank’s next moves as a critical factor for market sentiment.
“The wording will be critical in terms of whether they still see the possibility of another interest rate rise going forward,” Mr Christopher said.
“If they were to pivot and put out more indicators that they are concerned about a slowing economy, then potentially our interest rate pause might turn into something more significant.”
“That would be a positive for the market, but we wait and see.”
For now, Mr Christopher believes the balance of risk has shifted.
“This is consistent with the more cautious view we have held since March,” he said.
“The balance of risk has clearly shifted to the downside, and the next few months will confirm whether May was the inflection point.”