While home values are still edging higher, fresh data has suggested the long-running upswing may be nearing its limits.
Cotality’s April Housing Chart Pack has revealed that national dwelling values rose just 1.6 per cent over the three months to April – the softest quarterly gain since April 2025 – as higher interest rates and stretched affordability push the market to the cusp of a downturn.
The slowdown is sharpest in the largest capitals, where values have already slipped back from their recent peaks.
In April, Sydney dwelling values fell 0.6 per cent, taking the quarterly result to a 0.9 per cent decline and leaving prices about 1 per cent below the record high reached in November 2025.
Melbourne also recorded a 0.6 per cent fall in April and a 1.5 per cent drop over the quarter, with values now sitting 2.3 per cent below their March 2022 peak.
Cotality research director Tim Lawless said the weakness in the biggest cities had become an established downtrend.
“Historically there were several catalysts for housing declines, including global shocks, rising interest rates and periods of credit tightening,” he said.
Lawless added that the soft patch in Sydney and Melbourne was well underway before the rate hikes.
“Sydney and Melbourne are already five months into the early phases of decline, while growth is slowing across the mid‑sized capitals,” he said.
“Listings are picking up as demand softens, interest rates are rising while affordability and serviceability pressures are biting.”
Mid-sized capitals lose momentum
Outside the two largest markets, the figures point to a clear loss of speed.
Hobart dwelling values crept 0.2 per cent higher in April and 2.6 per cent over the quarter, while the ACT was flat on both a monthly and quarterly basis.
Brisbane values rose 1.2 per cent in April and 4.7 per cent over the quarter, and Adelaide advanced 1.1 per cent over the month and 3.5 per cent over three months.
Perth remains the outlier, with the city posting a 2.1 per cent jump in April and a 6.8 per cent rise over the quarter.
Combined capitals edge closer to decline
Across the capitals as a whole, Cotality’s index is only just in positive territory.
The combined capital city measure rose by just 1.1 per cent over the three months to April and a marginal 0.2 per cent in April alone.
Lawless said that he expected the capital‑city benchmark to slip into the red “over the coming months."
The shift comes after the Reserve Bank of Australia’s pivot back to tightening, reopening questions about household resilience.
Lawless said the rate moves were intensifying a slowdown that was already in train.
“This trend has been amplified by seventy‑five basis points of rate hikes so far this year and the chance of another hike, or hikes, later in the year,” he said.
“The market was already slowing well before the hiking cycle commenced, highlighting the downside impact of waning confidence from late last year alongside rising inflation and worsening levels of housing affordability.”
Equity cushions high, but newer buyers exposed
Despite the softer conditions, Cotality assessed that most households were entering this phase from a position of strength.
Lawless said that the latest slowdown followed several years of sizeable gains, leaving owners with substantial equity buffers.
“Historically, housing downturns have been relatively short‑lived, with all but three capital city downturns over the past 40 years lasting less than 12 months, although the length and magnitude have varied from city to city,” he said.
On the arrears front, the message from the chart pack is reassuring.
At the end of last year, mortgage arrears sat at around 1.45 per cent, below the 1.69 per cent peak recorded when interest rates were at similar levels in mid‑2024.
Lawless said ongoing labour‑market strength and prudential settings such as the 3‑percentage‑point serviceability buffer would help insulate loan books.
“An expectation that labour markets will remain tight, as well as a history of stringent prudential standards, including the three percentage point mortgage serviceability buffer, should help to keep mortgage arrears low as interest rates rise,” he said.
Yet Lawless cautioned that buyers who entered late in the cycle, particularly with minimal deposits, were most at risk.
“More recent buyers are likely to be exposed to the risk of negative equity as values fall, particularly those who entered the market with smaller deposits, including participants who took advantage of the Australian Government 5% Deposit Scheme,” he said.
[Related: Sydney, Melbourne slide as housing upswing hits turning point]
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