House prices in Sydney and Melbourne are declining as interest rate rises and economic uncertainty from the Middle East conflict deter buyers, new data shows. The Cotality data reveals a slowdown in price growth across Australia over the last three months, with the most expensive markets entering a downturn.
Melbourne's median home price fell by $5,000 to $828,249 in the first quarter of 2026, with the top end of the market dropping 1.9%. Sydney's median price decreased by $4,000 to $1,295,387, while the top-priced quarter saw a 2.4% fall. However, lower-priced properties in both cities saw modest gains, with demand strong in Sydney's west and south-west.
Realtor Charles Touma of Ray White in Redfern noted a stark contrast between February and March. 'February was great, I sold some really good properties at really good prices. Then March fell off a cliff,' he said. Consumer confidence hit record lows in late March, and auction clearance rates dropped, with only 61% of properties sold nationally in the final week of March.
Supply has been unusually strong on the east coast, with 4,062 auctions in the last week of March, the highest since December 2021. Cotality's research director, Tim Lawless, said falling clearance rates and increased supply are giving buyers more choice and less urgency. Meanwhile, Perth saw the strongest growth, with prices rising 7.3% to $1,017,698, though Lawless described this pace as unsustainable.
New housing loans had picked up in February before the second rate hike, with housing credit growing at 7.1% annually. However, borrowing is expected to slow as markets predict two more rate rises this year, possibly as soon as 5 May.
