Property values across Australia are projected to experience their most sluggish expansion since 2022, according to a recent survey of real estate experts conducted by Reuters. The slowdown stems from elevated mortgage rates and rising living expenses that are pricing out numerous first-time homebuyers from the market.
This represents a dramatic deceleration from approximately 10% growth recorded in 2025, following the Reserve Bank of Australia’s decision to increase interest rates by 75 basis points this year in an effort to combat ongoing inflation. The rate hikes have compressed affordability and reduced buyer demand.
During 2022, property values dropped more than 5% when the RBA launched an aggressive campaign of rate increases.
The survey, conducted between May 21 and June 4, revealed that median property values are expected to increase by 1.0% this year. Predictions varied widely, ranging from a 5.0% decrease to a 7.0% increase. Looking ahead, experts anticipate prices will climb 2.1% in 2027.
Despite the slower pace of price increases, housing affordability continues to be problematic, with median property values reaching approximately A$940,000 ($670,126) – roughly eight times the average household income. High inflation and borrowing costs are anticipated to keep pressuring household finances and buyer demand.
“There was only a short period where interest rates dropped last year and they’ve been increased three times this year. But that’s happened at the same time other factors have also affected the housing market, including reduced consumer confidence because of concerns about rising inflation and the cost of living, and then there was the Iran war,” explained Michael Yardney, founder of Metropole, a real estate advisory firm.
“This does affect the housing market because people don’t make big decisions like buying a new home, moving house, or buying an investment property when they’re not confident,” Yardney added.
Market performance is expected to differ significantly among Australia’s largest cities. Median projections indicate Sydney and Melbourne property values will decline 2%-3%, while Adelaide, Brisbane and Perth are forecast to see increases of approximately 6%-11% this year.
The Albanese government has implemented tax changes designed to address intergenerational inequality, substituting the 50% capital gains tax discount with inflation-indexed taxation and restricting negative gearing benefits.
Several economists caution that these policy changes might decrease rental housing availability, drive up rental costs and worsen affordability challenges, especially for first-time buyers.
Rental prices in urban areas are projected to increase 4%-6% over the next year, up from 3%-5% in a March Reuters survey, exceeding Australia’s 4.2% headline inflation rate recorded in April.
Economists remain divided regarding the outlook for first-time buyer affordability, with five anticipating improvement and four predicting worsening conditions.
A comparable situation is developing in New Zealand, where property prices are expected to remain largely unchanged this year as the Reserve Bank of New Zealand is anticipated to raise interest rates in the upcoming quarter.
