Highlights

  • Housing prices fall in most Capital cities as new housing loans decline.
  • Prices remain around 50 per cent above their early 2020 levels.
  • The RBA assesses financial stability risks from household borrowing as contained.

Australia’s housing market has softened as higher interest rates work through the economy, but Reserve Bank of Australia Governor Michele Bullock has stressed that Monetary Policy does not target property prices. In her 28 October 2026 Senate committee statement, she reported falling prices in most capital cities and fewer new housing loans while describing household borrowing risks as contained.

A Softer Market Follows Prolonged Growth

Bullock attributed the change in housing conditions to the usual transmission of monetary policy, tax policy changes and the broader economic environment. The decline follows a long period of strong growth underpinned by a structural undersupply of housing.

Housing prices are still around 50 per cent higher than in early 2020, leaving them well above the levels that preceded the prolonged period of strong growth described by the Governor.

The RBA expects housing prices to be affected when interest rates rise. Its policy focus is how those changes influence economic activity, the labour market and ultimately inflation, Bullock said.

Budget Pressure Persists but Borrowing Risks Remain Contained

Many households are facing pressure on their budgets. Nevertheless, only a small share of borrowers are in Negative equity or experiencing severe repayment difficulty, according to the Governor’s assessment.

Bullock acknowledged the challenges facing borrowers in those circumstances. Her statement distinguished the hardship experienced by some households from the broader conclusion that financial stability risks associated with household borrowing remain contained.

Higher rates are particularly difficult for households with mortgages that are also dealing with cost-of-living pressures. But monetary policy affects the spending, saving and borrowing decisions of all households and businesses, extending its reach beyond Mortgage repayments.

Inflation Remains the Policy Test

The cash rate target has risen by 100 basis points this year, including 25 basis points since the Committee’s June hearing. The full effects of recent increases have yet to flow through domestic activity because monetary policy works with a lag.

Household spending growth has been moderating only gradually. Meanwhile, Business Investment growth has strengthened, mostly through data centre and renewable energy projects, and the share of the population with a Job remains high.

Inflation has recently been around 3½ to 4 per cent in year-ended terms. Persistent domestic capacity pressures and global costs associated with the Middle East conflict are expected to keep it elevated for some time.

At its next meeting, the Board will examine whether tightening to date is sufficient to return Inflation to target in a reasonable time. Bullock emphasised that allowing high inflation to persist would further erode wages and savings through higher grocery, rent and electricity costs, with particular consequences for people on lower incomes and with little savings.