Australia’s housing market has continued to lose momentum, with national home values flatlining in May as higher interest rates, weak confidence and proposed property tax changes weigh on demand.
According to new Cotality data, Sydney and Melbourne led the weakness, with dwelling values falling 0.9 per cent and 0.8 per cent respectively in May. Values also slipped in Canberra, down 0.2 per cent.
Cotality research director Tim Lawless said the broad trend was one of the housing market losing steam, driven by several headwinds hitting at once.
“Generally, there’s a single catalyst that typically drives housing price inflections, whereas at the moment we’ve really got four headwinds that are quite clear.
“You’ve got affordability challenges, which have been existing for some time, but then on top of that, you’ve got 75 basis points of interest rate hikes, a global oil crisis that’s seen confidence fall off a cliff, and now you’ve got disincentives for investment as the budget’s handed down.”
The slowdown is also showing up in sales activity. Nationally, the estimated number of home sales over the past three months was tracking 2.2 per cent lower than a year ago and 4.1 per cent below the five-year average.
“I think that’s a real reflection of the fact that fewer people are participating in the market, partly because of the high cost of debt, but also because confidence is so low,” Mr Lawless said.
“As the market moves into a weaker cycle, there will be more people who simply don’t want to buy during a downturn for fear of catching a falling knife.”
A patchy housing market
Beneath the flat headline result, conditions across the country were mixed.
Perth and Darwin recorded the strongest monthly gains, both up 1.5 per cent, lifting median values to just over $1.05 million and $634,368 respectively.
Brisbane, Adelaide and Hobart also rose, but at a slower pace, each up less than 1 per cent.
Nationally, the median dwelling value is $941,864.
Mr Lawless said mid-sized capitals were still growing, but their pace of growth had roughly halved from the end of last year, with the market gradually easing from a very strong position.
Regional markets have remained more resilient, with values across the combined regions rising 0.6 per cent in May, although that was the smallest monthly increase in a year.
Lower-priced homes also continued to hold up better than higher-priced properties, supported by credit availability and first home buyer opportunities.
However, Mr Lawless said even some affordable segments were now starting to fall, including in parts of Sydney, Melbourne and Canberra.
AMP chief economist Shane Oliver said the national picture was likely to remain uneven.
“I suspect Perth will hold up reasonably well,” Dr Oliver said.
“It’s still playing catch-up in a way after years of weakness following the last mining boom over a decade ago.
“Outside of that, Adelaide and Brisbane are both slowing down.”
Dr Oliver said Sydney was particularly vulnerable because of poor affordability, while Melbourne had weak momentum and low confidence.
Source: National home values flatline in May for the first time since January 2025, Lin Lin for ABC News