One of Australia’s biggest banks has declared the housing boom over for half the country, after the Reserve Bank admitted it cut interest rates too aggressively into an already recovering market.
ANZ Research economists Madeline Dunk and Jack Chambers said Australia’s housing market “looks to be on the cusp of a modest slowdown” following Tuesday’s rate hike, which was the first increase since November 2023.
The bank believes Sydney and Melbourne are already retreating, with both cities recording price falls since late 2025.
Meanwhile, Perth, Brisbane, Adelaide and Darwin continue surging ahead, creating a nation split in two.
“The Sydney and Melbourne housing markets look to be slowing, with auction clearance rates trending lower and prices down compared to a few months ago,” Madeline Dunk said.
“More expensive properties in Sydney and Melbourne have dropped for three months in a row.
Ms Dunk said this matters because properties in the top price quartile often move first and by more when the housing market moderates.
“In other words, they are a leading indicator,” she said.
“This week’s RBA decision is likely to see the housing market soften further.
According to PropTrack, Sydney home values rose just 0.1 per cent in January and remain 0.4 per cent below their November peak.
Melbourne values fell 0.1 per cent and sit 0.8 per cent below their October high.
In contrast, Perth has surged 17.5 per cent over the past year, followed by Darwin at 14.7 per cent, Brisbane at 14.4 per cent and Adelaide at 13.8 per cent.
Sydney managed just 5.7 per cent annual growth, while Melbourne recorded only 3.5 per cent.
ANZ is the first major bank to downgrade the housing outlook following the RBA’s decision to raise the cash rate by 0.25 percentage points to 3.85 per cent.
Ms Dunk pointed to warning signs already visible beyond Sydney and Melbourne, including auction clearance rates weakening and building approvals stalling.
“Auction clearance rates will be an important signal to watch over coming weeks to understand the extent that the RBA’s decision to increase interest rates has impacted sentiment in the housing market.”
Private unit and townhouse approvals have plunged 19.6 per cent since September.
However, borrowing remains high, with private sector credit growth hitting 0.8 per cent in December – the strongest monthly gain since 2022.
Investor housing credit jumped 1.0 per cent, the biggest monthly increase since 2007.
ANZ believes the strong credit numbers mask underlying weakness, saying “it will likely take time for any softness in the broader housing market to show up in the credit numbers” due to typical lags.
For property owners in stronger markets, ANZ said “low levels of listings are helping to keep these markets tight” in Perth, Brisbane, Adelaide and Darwin.
The RBA has left the door open to further rate rises, with RBA Governor Bullock saying the bank would “do what it considers necessary” to return inflation to target.
ANZ’s Head of Australian Economics Adam Boyton warned “risks are clearly skewed to an additional hike” given the central bank’s focus on capacity constraints driving inflation.
Australian Property Scout’s Sam Gordon believes fears around the risk of a crash and impacts to property prices, following the rate hike, are being overstated.
Mr Gordon says a lack of housing supply and strong underlying demand mean today’s decision is unlikely to materially shift prices or buyer behaviour.
“There simply isn’t enough housing stock on the market currently for a rate move to have a significant impact, either in the owner-occupier or investor segments,” Mr Gordon said.
“Demand remains strong and this is definitely not a property crash scenario.”
“Most home and property loans written over the past 12 to 24 months have already been secured at higher interest rates, and the banks also run servicing buffers 3% higher than the actual home loan rates secured.
“In reality, it would take a series of further rate hikes to create any meaningful stress, let alone a housing market crash.”
