House prices in Sydney and Melbourne are falling as interest rate rises and economic uncertainty from the conflict in the Middle East deter buyers, new data shows. The Cotality report reveals growth has slowed across Australia in the last three months, with the most expensive markets entering a downturn.
Melbourne's median home price fell by $5,000 to $828,249 over the first three months of 2026, while Sydney's median dropped $4,000 to $1,295,387. The top end of both markets suffered the biggest declines, with Melbourne's most expensive properties falling 1.9% and Sydney's top quarter dropping 2.4%.
Realtor Charles Touma of Ray White in Redfern noted a sharp shift: “February was great, I sold some really good properties at really good prices. Then March fell off a cliff.” Consumer confidence hit record lows in late March, and auctions in inner Sydney saw a clearance rate of just 19% in the final week of the month.
Nationally, auction clearance rates fell to 61% in the last full week of March, the lowest since December 2022, with 4,062 auctions – the highest since December 2021. Cotality research director Tim Lawless said, “Falling auction clearance rates and a pickup in advertised supply are providing buyers with more choice and less urgency.”
Perth bucked the trend with 7.3% growth to a median of $1,017,698, though Lawless called the pace unsustainable. With markets predicting two more RBA rate rises later this year, borrowing is expected to slow further.
