The Reserve Bank's November forecasts put the housing market at the centre of a slowing economy, with lower prices and turnover expected to hold growth below trend into 2028.

When the Reserve Bank explains why it expects the economy to slow, housing now features prominently. The Monetary Policy Board's statement of 3 November 2026, which accompanied a 25-basis-point increase in the cash rate target to 4.85%, put it in one sentence: "Higher interest rates and falls in housing prices and turnover are expected to weigh on growth."

That line links two things the RBA is watching closely: the value of homes and the number of them changing hands. Together they shape a forecast in which the economy grows, but more slowly than its long-run pace, for some time.

The decision itself was split, with six members voting to raise the rate from 4.60% and three voting to hold. It was the fifth increase of 2026, adding up to 125 basis points this year.

Two housing signals, not one

Discussion of the property market often focuses on prices alone. The RBA's statement deliberately mentions turnover as well, and the distinction matters for the broader economy.

  • Prices. The statement says "housing prices have fallen significantly". Governor Michele Bullock told the Senate Economics Legislation Committee on 28 October that "Housing prices have fallen in most Capital cities". She also noted prices remain around 50% above early 2020 levels.
  • Activity. Bullock said "new housing loans have declined." Fewer loans and fewer sales mean less activity across the businesses that depend on property transactions.

The November Statement on Monetary Policy (SMP) brings the threads together: "Tighter monetary policy alongside a weaker outlook for the housing market is expected to keep GDP growth below trend."

What the growth forecasts show

The SMP's GDP forecasts trace the expected slowdown. They are year-ended growth rates, with the August forecast shown in brackets. Later dates are forecasts, not outcomes.

  • June 2026: 2.1% (1.9%)
  • December 2026: 1.6% (1.4%)
  • June 2027: 1.6% (1.5%)
  • December 2027: 1.3% (1.6%)
  • June 2028: 1.3% (1.6%)
  • December 2028: 1.5% (1.8%)

Two features stand out. First, the near-term numbers have actually been revised up compared with August. Second, from December 2027 onwards the forecasts have been cut, with growth now expected to bottom at 1.3%. The statement described this as "The forecasts see growth in output slowing further over the coming year".

The statement points to one near-term support: Business investment, including data centres, is stronger in the near term. The September minutes noted business Investment was up more than 10% over the year. So while housing pulls activity down, investment is pulling in the other direction for now.

Why a housing slowdown spreads

Housing touches the wider economy through several routes. Lower prices can make households feel less wealthy and more cautious about spending. Fewer sales reduce activity tied to buying and selling homes. Tighter borrowing conditions limit how much new Credit flows into the market.

Bullock observed that "Household spending growth has been moderating only gradually." The RBA expects that to continue as higher rates and housing weakness take hold.

This slower growth is not an unwanted side effect from the Board's point of view. It is part of the intended mechanism. The SMP says "The economy is currently operating with excess Demand and is judged to reach balance next year". Deputy Governor Andrew Hauser, speaking at a Citi conference in Sydney on 21 October, was explicit: "We need a period of below-trend growth to bring Inflation down, and we're seeing that happening."

Hauser also noted that the RBA had cut its assumption for underlying productivity growth from 1% to 0.7%, a change that bears on what counts as trend growth.

The inflation problem that sets the pace

The reason the Board is willing to accept a housing-led slowdown is that inflation remains well above the 2–3% target. The two main measures are:

  • monthly headline CPI, up 4.3% over the year to September 2026;
  • trimmed-mean inflation, the RBA's preferred underlying measure, up 3.7% over the year to the September quarter.

The SMP forecasts headline inflation of 4.5% by December 2026 and trimmed mean of 3.6%, with both staying above 3% through much of 2027. The table shows headline at 2.7% and trimmed mean at 2.9% by December 2027. These are forecasts, and the RBA notes scenarios in which inflation is higher and activity lower.

The SMP stated: "Inflation in Australia remains well above target and a number of upside risks have crystallised since the August Statement."

A slower economy has consequences for jobs. The SMP forecasts the Unemployment rate rising from 4.4% in June 2026 to 4.8% by June 2027 and 5.1% by December 2028. The statement noted that "the unemployment rate is projected to rise by more than expected in the August forecasts", although employment is still expected to grow.

The RBA does not pretend this is costless. Hauser said: "No lost Job is one to celebrate."

Bullock was keen to clarify the RBA's intent regarding property itself: "monetary policy does not target housing prices." The fall in prices, in other words, is a channel through which policy is working, not the goal.

The bottom line

The RBA expects falling housing prices and lower turnover, together with higher interest rates, to weigh on growth, keeping it below trend over the forecast period. Its November forecasts see GDP growth easing to 1.3% by December 2027, lower than projected in August, even as near-term growth is supported by business investment including data centres. The Board views this slowdown as part of bringing inflation back to target, though it carries costs for jobs. The next decision is due on 8 December 2026. Readers considering what housing conditions mean for them can consider speaking with a licensed adviser or their lender.