RBA rate pause and demand pressures underpin market outlook
Australian home values are projected to keep rising into 2026, even as the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.6% in November.
According to property data and analytics provider Cotality, the central bank’s decision has created uncertainty around the future path of interest rates, with some economists suggesting the rate-cutting cycle may have ended for good.
While the pause is likely to slow the pace of price growth, several factors continue to underpin demand, according to Eliza Owen, head of research at Cotality.
The Cotality Home Value Index recorded a 1.1% increase in October, the strongest monthly gain since June 2023. Earlier rate reductions this year have made credit more accessible, and Cotality estimates that the affordable purchase price for a median-income household has risen by almost $65,000 since the end of 2024.
“The median dwelling value in Australia has increased around $43,000 in the same period, suggesting increased purchasing power is being quickly priced into the market,” Owen (pictured right) said.
Additional support for home values comes from government initiatives, such as the expansion of the 5% deposit scheme for first-home buyers, which has improved credit access for eligible borrowers and may have contributed to increased demand in lower and mid-value segments during October.
Persistent supply and demand imbalances have also kept upward pressure on prices. In the three months to October, estimated sales reached 140,000, outpacing the 125,000 new listings reported by Cotality. Although September saw a rise in building approvals, new housing construction remains below target.
“Existing borrowers may be disappointed with the pause; however, mortgaged households are generally in a better position than at the end of 2024,” Owen said.
Average variable rates for owner-occupiers dropped by 77 basis points between January and August, reducing repayments by $370 per month on a $750,000 loan. Housing arrears reported by APRA fell to 1.6% in September, down from 1.7% in June 2024, suggesting fewer forced sales even if market conditions soften.
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