When Assistant Governor Christopher Kent ran through the evidence that higher rates were working, a weekend fixture of Australian property markets made his list.

Auction results are among the most closely watched numbers in Australian housing, offering a quick read on how eager buyers are.

So it was notable that, in a fireside chat titled "The Restrictive Stance of Monetary Policy" in Sydney on 13 August, Assistant Governor (Financial Markets) Christopher Kent pointed to them directly. He said "forward indicators such as auction clearance rates have also declined to be below their long-run averages."

The remark was one piece of a broader argument: that "the three cash rate increases earlier this year are having their intended effects."

Why a forward indicator matters

Kent's choice of words is telling. He described auction clearance rates as a "forward" indicator, meaning they tend to signal where the market is heading rather than confirm where it has been.

Monetary policy works with long and variable lags. Governor Michele Bullock said at her 29 September media conference that the full effect of rate changes "can take 12, perhaps even 18 months" to work through. Measures that move early give the Board a glimpse of whether policy is gaining traction before slower data confirm it.

At the time Kent spoke, the cash rate stood at 4.35 per cent, following quarter-point increases on 3 February, 17 March and 5 May. He described the setting this way: "the Board judged that monetary policy is somewhat restrictive." He also said: "The current cash rate is around the top of the range of central estimates of the neutral rate."

In other words, the RBA saw policy as leaning against demand, and housing was one of the first places that pressure was visible.

The fuller housing picture Kent described

Auction clearance rates did not appear in isolation. Kent laid out a series of housing-related observations in the same remarks:

  • "Housing prices have declined in Sydney and Melbourne, with declines becoming increasingly broad-based."
  • "Growth of new housing loans has fallen significantly."
  • "housing credit growth, which moves closely with housing prices, has started to slow."
  • "tax changes announced in the federal budget appear to have contributed to reduced demand in the established housing market."

He also noted that "Scheduled mortgage payments have risen and are now close to their 2024 peak as a share of household disposable income." Higher repayments reduce how much buyers can borrow and spend, which in turn affects how many bidders turn up on auction day.

The August Statement on Monetary Policy put a figure on the national trend at the time: housing prices were down 1.6 per cent from their March peak. That is a modest decline by historical standards, but it marked a clear change in direction after years of gains.

What has happened since August

The housing signals Kent described have since been echoed at the highest levels of the Bank.

Appearing before the House of Representatives Standing Committee on Economics in Canberra on 18 September, Bullock said: "Housing prices have fallen in most capital cities and new housing loans have declined." She also offered perspective on the starting point: "housing prices are still around 50 per cent higher than they were in early 2020."

Eleven days later, on 29 September, the Monetary Policy Board raised the cash rate by another 25 basis points to 4.60 per cent. The Board's statement noted that housing prices have fallen in most capital cities and that new housing loans have declined noticeably. It also flagged that the effects of the housing downturn are uncertain.

Despite softer housing, the Board judged that "a further tightening of financial conditions" was warranted. Its statement said inflation remains elevated, that some upside risks flagged in August were materialising, and that recent inflation outcomes had been stronger than expected. The monthly CPI indicator showed headline inflation of 4.0 per cent over the year to August, while the trimmed mean measure of underlying inflation was 3.6 per cent over the year to the June quarter.

Is a cooler housing market a risk to stability?

A falling market naturally raises questions about borrowers and banks. The RBA's October 2026 Financial Stability Review, released on 1 October, addressed that directly.

It found negative equity affects "less than 1 per cent of borrowers", and that even under a further 20 per cent fall in prices, "only around 5 per cent of mortgages would fall into negative equity". Bullock made a similar point to parliament, saying "the share of borrowers in negative equity remains very limited".

The review also found arrears on loans 90 or more days past due have risen slightly but remain "around pre-pandemic levels", and that "the median borrower [is] able to cover over a year of scheduled mortgage payments" from offset and redraw buffers. Its media release said most mortgage households are well placed to cope even with a sharp fall in house prices, though there are some pockets of stress.

Put simply, the RBA views the housing slowdown as one of the channels through which tighter policy is meant to work, rather than as a sign of financial fragility.

Back on the demand side, clearance rates are a useful gauge of sentiment, but no single indicator tells the whole story. Kent framed them as one forward indicator among several, alongside housing credit, new lending and prices. When multiple measures move in the same direction, the signal is stronger than any one alone.

Nor does softer housing settle the policy outlook. Bullock was explicit on 29 September: "I'm not going to give you forward guidance." The Board's next decision is due at 2.30 pm on 3 November, and the next CPI update is scheduled for 28 October. Kent is also due to speak again in October, including a fireside chat at the CBA Global Markets Conference on 19 October.

The bottom line

Kent's observation that auction clearance rates had fallen below their long-run averages was a small detail with a clear message: by August, higher interest rates were visibly cooling buyer demand. Combined with slower housing credit, sharply lower growth in new loans and falling prices in Sydney and Melbourne, it formed part of the RBA's evidence that its 2026 rate rises were working.

Those signals did not stop the Board lifting rates again in September, because inflation, not housing, remains its central concern. The RBA's own stability assessment suggests the housing slowdown is so far manageable for most borrowers, but with much of this year's tightening still to flow through, the property market will remain one of the most closely watched barometers heading into the November meeting.