Australia’s Housing Recovery Stalls: What’s Behind the Slowdown in Momentum?

Conor's Corner

"We are seeing this at the coalface.. many households are heavily overleveraged, and the strain is becoming increasingly visible. Interestingly, banks have been preemptively reducing rates ahead of official RBA moves, likely in an effort to stimulate demand. But despite these efforts, downward pressures in the market are still very real."

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After months of modest gains, Australia’s housing market appears to be losing steam, signaling a shift in sentiment and raising fresh concerns about affordability, interest rates, and long-term market stability.

According to data highlighted in a recent report by CoreLogic and analyzed by Macrobusiness, the housing price recovery that began in mid-2023 has begun to decelerate across several capital cities. This plateau in momentum reflects a combination of factors including buyer fatigue, tighter credit conditions, and increasing listings diluting demand.

📉 Capital City Performance Shows Mixed Signals

The CoreLogic Home Value Index shows that while Sydney and Brisbane continue to post mild gains, other cities like Melbourne and Hobart have entered negative territory. Melbourne, in particular, has recorded small but steady declines in recent weeks.

This divergence suggests that local factors—such as employment growth, population migration, and housing supply—are playing a bigger role than before, contrasting with the synchronized national upswing seen in previous cycles.

💰 Affordability and Interest Rates: The Twin Pressures

Higher interest rates remain a persistent drag on buyer confidence, especially among first-home buyers who were already stretched thin by rising property prices in 2022–2023. Although the RBA has paused rate hikes, expectations remain volatile, and inflationary pressures could prompt further tightening.

At the same time, affordability continues to worsen, with many would-be buyers priced out of the market. Investor activity has also softened, likely due to the diminishing prospect of near-term capital gains and tighter rental yields.

🏗️ Supply and Listings on the Rise

One significant shift is the growing volume of property listings. Sellers who held off during the downturn are returning to the market, creating a more balanced—if not slightly oversupplied—environment. This is diluting competition among buyers and contributing to the easing in price growth.

Construction bottlenecks and cost blowouts have also added pressure to new supply pipelines, meaning demand is still meeting friction, especially in growth corridors.

🔮 Outlook: A More Cautious Phase Ahead?

The moderation in housing market momentum suggests Australia may be entering a more cautious, localized phase of the property cycle. While outright declines are not yet widespread, the previous optimism around a sustained rebound is fading.

Analysts warn that any significant deterioration in consumer sentiment, or an unexpected economic shock, could accelerate weakness—particularly in cities where prices remain historically high.

For buyers, this may present opportunities to re-enter the market with more negotiating power. For sellers, the message is clear: the days of automatic price rises may be behind us, at least for now.