Key Highlights

  • National home prices were 4.7 per cent below their March peak in September.
  • The RBA says prices are falling faster than it had expected.
  • The price fall is feeding into the Bank's view of the economy and inflation.
  • Falling values affect households through Wealth and borrowing capacity.

Six months after the peak, the RBA describes the housing market in stronger terms. In its 3 November statement announcing a fifth rate rise for the year, the Monetary Policy Board said "housing prices have fallen significantly". The November Statement on Monetary Policy (SMP) put the decline at about 5 per cent from the March peak.

The economic conditions chapter gives the exact figure: national housing prices were 4.7 per cent below their peak in September 2026, and that peak was in March.

How the decline lines up with the rate rises

The timing matches the rate rises. The cash rate target began 2026 at 3.60 per cent and was raised, by effective date, to:

  • 3.85 per cent on 4 February
  • 4.10 per cent on 18 March
  • 4.35 per cent on 6 May
  • 4.60 per cent on 30 September
  • 4.85 per cent on 4 November

Prices peaked in March, around the time of the second rise. By September, after the third and with a fourth about to take effect, they were 4.7 per cent below that level. The Board's statement says "The increases in the cash rate target since the beginning of the year have tightened financial conditions." Housing is one of the most interest-sensitive parts of the economy, so a fall there is consistent with that tightening. The RBA's documents do not, however, attribute the entire decline to the cash rate.

Faster than expected, with forecasters expecting more

The RBA's November documents make two points about the speed of the decline. First, established housing prices are falling faster than the RBA had expected. Second, the SMP notes that external forecasters expect a deeper downturn.

The RBA reports that second point as other forecasters' views. It does not publish its own forecast for house prices in the material summarised here, so readers should not treat any particular further decline as an RBA projection.

What the RBA does forecast are the knock-on effects. The statement notes that "falls in housing prices and turnover are expected to weigh on growth in dwelling investment". The SMP forecasts dwelling Investment to shrink by 2.8 per cent over the year to December 2027 and by 1.8 per cent over the year to December 2028. Weaker housing, together with a higher assumed cash rate path, is a key reason the RBA forecasts lower GDP growth from mid-2027.

Putting 5 per cent in context

A fall of about 5 per cent needs to be seen in context. When Governor Michele Bullock appeared before the Senate Economics Legislation Committee on 28 October, she said "housing prices are around 50 per cent higher than they were in early 2020."

So this year's fall comes after a large rise over the previous several years. That does not make it less significant for people who bought near the March peak. But it means that, nationally, prices remain far above where they were before the decade's big run-up.

The RBA's October Financial Stability Review addressed the household balance-sheet question. It found that most borrowers are well placed for softer growth and lower housing prices, and that most have positive Equity and large savings buffers. It described the financial system as resilient, adding "there's no room for complacency." It also found that banks are well capitalised.

What falling prices mean for the RBA's outlook

Falling home prices affect the RBA's thinking in two ways.

They can slow spending. The SMP notes that Inflation could fall faster than forecast if higher rates and falling housing prices weigh on household spending. Household consumption is already a key drag on growth: it rose 1.8 per cent over the year to the June quarter, and the RBA forecasts growth of 1.4 per cent over the year to December 2026.

They feature in the downside scenario. The SMP's downside activity scenario assumes households and businesses respond more strongly to oil prices, interest rates and falling house prices. In that case, GDP is about 1.0 per cent lower by end-2028 and Unemployment is 0.3 percentage points higher, while inflation is only modestly lower.

Even so, the Board raised rates again, because its concern about inflation outweighed these effects. The Monetary Policy Board's statement said: "Inflation remains elevated and recent data indicate that it is broadly based." In the September quarter, headline CPI inflation was 3.9 per cent year-ended and trimmed-mean (underlying) inflation was 3.7 per cent year-ended. The monthly headline CPI was 4.3 per cent in the year to September 2026.

The majority judged that "there is an increasing risk that higher inflation expectations will become embedded." Three of the nine members voted to keep the cash rate at 4.60 per cent. The statement does not say why. Whether the housing slowdown featured in their thinking is not something the published material reveals.

The housing slowdown has not stopped Credit growth. The RBA's Financial Aggregates for September 2026, published on 30 October, showed housing credit up 0.4 per cent in the month and 7.0 per cent over the year. Total credit rose 8.4 per cent over the year.

Those figures suggest the housing market is cooling rather than collapsing. Lower prices and turnover usually show up in credit growth over time, but the September data still show solid annual growth.

The RBA's forecasts assume a cash rate path based on market pricing as at 28 October 2026. That pricing implies a further rise of about 35 basis points by mid-2027, before the rate stabilises at 4.8 per cent in 2028. This is a market assumption, not a commitment by the RBA. The statement says "the Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions." The next decision is on 8 December 2026, after the CPI release on 25 November.

The bottom line

National home prices were 4.7 per cent below their March peak in September. The RBA describes this as a significant fall, faster than it expected, and notes that external forecasters expect more. The RBA forecasts that weaker housing will weigh on dwelling investment and growth from mid-2027. Its stability review, though, finds most borrowers have equity and savings buffers. For now, the Board has judged that broadly based inflation is a bigger concern than a cooling housing market.