Highlights

  • Bullock told senators that housing prices have fallen in most, but not all, capital cities as of October 2026.
  • New housing loans have also declined, showing the credit channel through which tighter monetary policy reaches the housing market.
  • Despite recent falls, housing prices remain approximately 50% above early-2020 levels, preserving substantial equity for most owners.
  • The RBA's negative equity stress test used in the September minutes assumed a 20% fall as a hypothetical, not a forecast.

Two short observations in Governor Michele Bullock's opening statement to the Senate Economics Legislation Committee on 28 October captured a shift in Australia's housing market. Prices have fallen in most capital cities. New housing loans have declined. Neither came with a headline number in the statement, but together they describe a market that has cooled during a year of four rate rises.

Prices Falling in Most Capital Cities

Bullock's statement used the word "most" rather than "all" capital cities. This means the decline is broad but not universal. Some markets may still be holding their value or declining more slowly. The aggregate direction is downward in the majority of cities, which represents a meaningful shift from the sustained price growth seen in earlier years.

Prices falling in most cities does not erase the gains of the past several years. On Bullock's figure, prices remain about 50% above early-2020 levels. For many owners, this leaves a cushion of equity built over that period. The October 2026 Financial Stability Review noted that most borrowers have positive equity in their homes.

New Lending Also Down

The second signal is in credit flows. New housing loans have declined. This is one of the main channels through which higher interest rates affect the housing market: as borrowing costs rise, the amount borrowers can qualify for falls and some prospective buyers delay or reduce purchases. Lower new lending tends to dampen demand and, over time, prices.

For households already in the market with existing loans, falling new lending does not directly affect their repayment obligations but signals that fewer new borrowers are entering the market at current rates, a shift in the competitive environment for sellers and investors.

The Equity Picture and Stress Testing

The Board's September minutes referenced a negative equity stress test that assumed a 20% fall in housing prices. This was used to test system resilience, not as a projection. The test showed that even under a scenario of significant price declines, the majority of owner-occupiers would retain positive equity because of the large gains since 2020.

The RBA has been explicit on one boundary: "monetary policy does not target housing prices." Rate decisions are directed at inflation and employment, not at managing property values. Housing price movements are relevant to the broader economic outlook but are not themselves a policy objective.