While the RBA is expected to keep the cash rate on hold on Tuesday, the Board is likely to warn further rate hikes could be required to bring inflation under control, adding pressure to a housing market already losing momentum.
Three rate hikes this year have already taken a sizable bite out of buyers’ borrowing power.
Canstar analysis shows an average income earner’s maximum borrowing capacity has already fallen by an estimated $35,400 since the start of the year, while for a couple both earning the average wage, their maximum home-buying budget is down an estimated $70,700.
A fourth rate hike, if it eventuates, would push those drops to borrowing capacity $46,300 and $92,500 respectively, squeezing home buyers even further despite softening property prices.
Estimated decrease in | ||
|---|---|---|
| Individual | Couple |
February hike | -$12,200 | -$24,400 |
March hike | -$11,800 | -$23,600 |
May hike | -$11,400 | -$22,700 |
Additional | -$10,800 | -$21,800 |
TOTAL | -$46,300 | -$92,500 |
Source: Canstar. Based on an owner-occupier taking out a 30-year loan at the average RBA new customer rate. Assumes expenses of $24k p.a for single and $48k for couple, no debts, no dependents, average wage based on ABS data. See full notes below.
Prices set to slide through to the end of the year in most capital cities
NAB’s latest forecast, released on Tuesday, shows prices in Sydney could be in for the biggest drops of up to 10% across the 12 months through to 31 Dec 2026.
Canstar analysis using Cotality data shows, if NAB’s forecast is realised, the median house price in Sydney could drop by more than $160,000 over the year.
However, even some of the more robust markets are now showing signs of slipping on the back of higher interest rates and the federal government’s property tax changes.
While NAB expects property prices in Brisbane, Perth and Adelaide to finish the year higher than where they started, most of that growth has already been recorded in the first seven months of the year.
If the bank’s forecast comes to fruition, the median house price in Brisbane could fall by $28,380 from August through to the end of the year, while the median house prices in Perth and Adelaide could drop by $17,200 and $30,754 respectively.
Projected change to | |||
|---|---|---|---|
| Change over year: | Change from today: | Median price - |
Sydney | -$162,447 | -$67,284 | $1,462,024 |
Melbourne | -$89,583 | -$30,748 | $905,780 |
Brisbane | $23,111 | -$28,380 | $1,178,659 |
Perth | $50,300 | -$17,200 | $1,056,300 |
Adelaide | $9,673 | -$30,754 | $976,930 |
Hobart | $38,441 | +$2,095 | $807,260 |
Source: Canstar, Cotality Home Value index for 31 Dec 25 and 31 July 26, NAB Housing Monitor released 4 August 2026. $ change for each capital is the predicted movement in the median house price in each capital if NAB’s 2026 forecast is realised. Assumes house prices change in line with dwelling forecasts. These calculations are estimates based on forecasts, which are subject to change and may prove inaccurate. Forecasts should not be relied upon as the sole basis for making financial decisions. Individuals should consider their own circumstances and seek independent financial advice.
One step forward, two steps back for buyers
Canstar’s Data Insights Director, Sally Tindall, says, “For would-be buyers, this is shaping up to be a classic case of one step forward, two steps back. While falling property prices may look like a win for people trying to get into the market, higher interest rates are keeping borrowing budgets in a bind.”
“The challenge for buyers is that a cheaper price tag doesn’t necessarily mean a more affordable home if your borrowing capacity has been cut at the same time.
“Anyone who’s been on the property-buying beat since the start of the year will tell you their borrowing power has taken a hit. Another rate hike, should one eventuate this year, would tighten the screws even further.
“Headline inflation might have made a somewhat unexpected drop in June, but core inflation is still sticky. The RBA might not hike on Tuesday, but it's difficult to see it ruling out further hikes altogether.
“NAB’s latest revised forecast points to further softening in property prices through to the end of the year, not just in Sydney and Melbourne but in other capitals that were previously defying the rate hikes.
“If NAB’s forecast plays out across house prices, estimates show a median-priced house in Sydney could fall by more than $160,000 over the 12 months to December this year. That’s a tough pill to swallow for home owners who bought at the peak with next to no buffer. Negative equity is a very real prospect for these borrowers.
“The key is to run your own race. As a potential new buyer, make sure you have plenty in the tank in case of tougher times ahead. Existing borrowers should prepare for another hike, even if the headlines are suggesting we’re already at the peak. Certainly, the RBA has not declared the battle with inflation won and done.”
