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Housing price growth in Australia remained multi-speed in April but slower growth is starting to spread.

Dwelling prices continued to decline in Sydney and Melbourne. It’s not unusual for prices in the two major capitals to exhibit more volatility than elsewhere.

Overall, nationwide dwelling prices rose +0.3% m/m in April in Australia and just +0.2% m/m in the capital cities.

The slowing in dwelling price growth began before the RBA increased the cash rate in early February, but that is not unusual. Households’ appetite to buy housing has waned.

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Housing price growth in Australia has become multi-speed in recent months. While growth remains strong in Perth, Adelaide and Brisbane, prices fell in Sydney and Melbourne in March for the second consecutive month.

That slowing began well before the RBA increased the cash rate in early February and has occurred amid some waning in households’ appetite to buy housing.

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Our focus this month is on Australia given little new information and action in New Zealand’s housing market.

Housing price growth in Australia has become multi-speed in recent months. While growth remains strong in Perth, Adelaide and Brisbane, it has stalled in the larger cities of Sydney and Melbourne.

That slowing began well before the RBA increased the cash rate in early February and has occurred amid some waning in households’ appetite to buy housing.

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Momentum in the Australian housing market is facing a test if the RBA Board lifts the cash rate tomorrow.

To date, lower interest rates, excess demand and ramped-up government incentives for first home buyers have supported a relatively strong pick up in dwelling prices.

While monthly dwelling price growth in Australia slowed a little over December and January (post seasonal adjustment), it remained strong. Price growth remained fastest in Perth, Brisbane and Adelaide, and considerable more moderate in the largest cities of Sydney and Melbourne.

Nationally, the stock of homes for sale remained at a low level in January, and much lower than at the start of the year despite reasonably healthy new listings. This dearth of supply is likely to support solid housing price growth in at least the near-term.

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The Australian housing market is gathering momentum amid lower interest rates and ongoing excess demand. Ramped-up government incentives for first home buyers will only add fuel to the fire, at least temporarily. We doubt that APRA’s speed limits on high debt-to-income lending from 1 February 2026 will have much bearing on housing market dynamics.

Monthly dwelling price growth in Australia picked up further over November, with prices rising across all capital cities. Price growth was particularly strong in Perth, Brisbane and Adelaide.

Investor housing credit growth has strengthened materially to be a monthly annualised ~11% in October. Google search activity related to investment property buying has skyrocketed.

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The Australian housing market is gathering momentum amid lower interest rates. Ramped-up government incentives for first home buyers will only add fuel to the fire, at least temporarily.

Monthly dwelling price growth picked up further over October, with prices rising across all capital cities. Price growth is particularly strong in Brisbane and Perth.

As is often the case, the pick-up in housing price growth has incentivised more vendors to list homes for sale.

The pick-up in investor housing credit growth - the fastest since 2015 - suggests that investors anticipate a period of strong housing price growth ahead. Google search activity related to investment property buying has skyrocketed.

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The Australian housing market is gathering momentum amid lower interest rates. Ramped-up government incentives for first home buyers will only add fuel to the fire, at least temporarily.

Monthly dwelling price growth strengthened again over September, with prices rising across all capital cities and broad regional areas. Price growth in Melbourne remained a laggard.

The pick-up in investor housing credit growth - the fastest since 2015 - suggests that investors anticipate a period of strong housing price growth ahead. Google search activity related to investment property buying has skyrocketed.

Our view is that there remains significant excess demand for housing in Australia as clearly indicated by very low, and falling, residential rental vacancy rates across all capital cities.

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The Australian housing market is gathering momentum amid falling interest rates. Ramped-up government incentives for first home buyers will only add fuel to the fire, at least temporarily.

Measures of monthly dwelling price growth have increased since late 2024 and several capital city markets are gaining momentum.

History suggests that dwelling price growth will outstrip household income growth as interest rates decline, with that process already occurring.

Rising (real) housing prices should continue to incentive developers to build more housing.

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Mention that interest rates will, or might, fall and Australians cannot help themselves.

Measures of monthly dwelling price growth bottomed in late 2024 and have increased since then. Interestingly, nationwide price growth has lost a bit of momentum in recent months according to PropTrack’s data which often lead Cotality’s more widely cited figures.

We suspect that this is a bit of a blip given another interest rate cut is in the offing at the RBA’s August Board meeting.

History suggests that we should expect dwelling price growth to outstrip growth in average household disposable income as interest rates decline.

That said, the already-elevated dwelling price-to-income ratio and our expectation for relatively modest monetary policy easing suggests that the current upswing in housing prices could be relatively moderate in an historical context.

Rising (real) housing prices should continue to incentive developers to build more housing.

Our view is that there remains significant excess demand for housing in Australia as clearly indicated by very low, and falling, residential rental vacancy rates.

This is again putting some upward pressure on growth in advertised housing rents.

In New Zealand, it’s a different picture. Despite relatively large falls in borrowing rates, the reaction across established and new housing markets has so far been relatively muted.

Kiwi housing prices have risen a little, though sales volumes have been a more responsive. The stock of homes for sale remains elevated and population growth has slowed significantly - quite a different story to Australia.

The number of home building consents in New Zealand has broadly moved sideways over the past year or so and declines relative to nominal GDP.

Full chartpack is below.

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Actual and expected falls in interest rates are continuing to put upward pressure on Australia’s established housing prices and demand. On top of that, several governments have announced demand-side policies, typically aimed at first home buyers.

Housing price growth picked up further in June and online search activity points to another surge in interest in investment properties. Moreover, growth in housing credit has recently been a bit faster for investors than for owner-occupiers.

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Falling interest rates are starting to get the juices flowing in Australia’s established housing markets.

Housing price growth in May was solid and auction clearance rates have picked up. While some of this improvement is seasonal, anecdotal evidence from real estate agents suggests that buyer activity has strengthened since interest rates have been lowered.

Online search activity also points to renewed interest in investment property in Australia in May. There was also a jump in searches for “display home” in the month which have a solid (leading) correlation with house building approvals.

In contrast, online search activity suggests that Australian households’ appetite to renovate has recently diminished.

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In New Zealand, the effects of sharply lower fixed mortgage interest rates - down ~2ppts - are starting to show up more clearly in rising housing demand. Housing prices have risen a little in recent months and the number of housing loan commitments has continued to gradually increase.

Lower interest rates can be expected to support a pick-up in residential building in New Zealand which has fallen a large 1.5% of GDP from the peak.

Similar to Australia, there are signs of life in building permits for higher-density home construction but permits to build houses remain at a low level. We suspect that this will soon change.

Signs of a turnaround in New Zealand’s net immigration will also support housing demand.

Full chartpack and analysis is below.

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Housing prices in Australia again rose modestly over March, though some of that is likely to be seasonal. Prices increased in nearly all capital cities and monthly growth has converged across regions. The number of homes listed for sale has dipped a little in recent months in response to the prior slowing in dwelling price growth.

Encouragingly, the number of residential building approvals in Australia has picked up and actual dwelling starts have followed (as usual).

As has historically been the case, the pick-up in home building approvals has occurred against a backdrop of rising real dwelling prices. While the recent slowing in real dwelling price growth may be a near-term headwind to how quickly home building approvals continue to recover, anticipated interest rate cuts over the next 6-12 months should provide a tailwind to both price growth and building approvals.

In New Zealand, only modest effects from sharply lower fixed mortgage interest rates are evident in housing demand. Housing prices have risen a little in recent months, though the stock of homes for sale reached a new cyclical high in March. The number of housing loan commitments, however, has continued to gradually increase.

While lower interest rates can be expected to support a pick-up in residential building in New Zealand, there are few signs yet of it happening. The sharp slowing in population growth to be clearly below growth in the dwelling stock also reduces the need to build significantly more housing.

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Housing prices in Australia rose modestly over February. Prices increased in nearly all capital cities and monthly growth has converged across regions. The number of homes listed for sale appears to have peaked around the turn of the year and has since dipped a little.

While some of the increase in housing prices may be seasonal, expectations - and the delivery - of a cash rate cut are likely to have supported home buying activity. We noted last month that the small dip in housing prices in late 2024 was likely to prove short-lived.

Across the ditch in New Zealand, the effects of lower interest rates are starting to show up in housing demand. New housing finance has trended higher, including for housing purchases and building. Monthly dwelling price growth has turned positive in recent months.

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Housing prices were little changed over January in Australia. Dwelling prices continued to decline in Sydney and Melbourne and growth has slowed in other capital cities. Sales volumes are down and listings are up.

The spectre of lower interest rates raises the possibility that the current softness in Australian housing prices will prove reasonably short-lived. Working in the other direction, however, is the waning support from the pandemic-era build-up in household deposits.

As we noted last month, there is a broad relationship between growth in real housing prices and real private demand, often with a lag because housing prices are one of the most interest-rate sensitive economic variables.

At face value, our expectation for a pick-up in private demand growth in Australia is consistent with the prior recovery in real housing price growth (due to lags).

If housing price weakness were to persist for an extended period - say, due to prices catching down to typical borrowing capacity - then we would expect the forecast recovery in private demand growth to peter out.

Adverse wealth effects would be expected to weigh on consumer spending growth and lower housing prices would disincentivise dwelling investment. The cycles for residential building and dwelling prices are very similar.

For now this is in the risk bucket.

Across the ditch in New Zealand, the effects of lower interest rates are starting to show up in housing demand. New housing finance has clearly strengthened, including for housing purchases and building. Monthly dwelling price growth has been volatile but prices appear to have stopped falling. Consents for new home building also appear to have stabilised following a significant decline.

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Housing prices fell slightly over December in Australia, led by solid declines in Sydney and Melbourne, which have continued into early January.

Australian housing prices have been pretty resilient to higher interest rates. Maybe that's another sign of monetary policy not being overly tight in Australia. Strong net immigration and the build-up in household savings during the pandemic are likely to have also played a role to offset the effect of lower borrowing capacity amid higher interest rates.

The reaction of housing prices (and the dwelling price-to-income ratio) to higher interest rates has been a bit different this time to the past (see shaded areas in chart).

But all tightening episodes have elicited somewhat different responses.

While real housing prices and the price-to-income ratio have risen over the past couple of years, they both remain below the peaks.

How much do housing prices matter for the broader economy?

There is a broad relationship between growth in real housing prices and real private demand, often with a lag. (Like most things, however, the pandemic played a bit of havoc with the relationship.)

It's not clear how strong the causality is here, with interest rates affecting both - it typically affects housing prices more quickly.

At face value, our expectation for a pick-up in private demand growth in Australia is consistent with the prior recovery in real housing price growth (due to lags).

If housing price weakness were to persist for an extended period - say, due to prices catching down to typical borrowing capacity - then we would expect the forecast recovery in private demand growth to peter out.

Adverse wealth effects would be expected to weigh on consumer spending growth and lower housing prices would disincentivise dwelling investment. The cycles for residential building and dwelling prices are very similar.

Of course, the RBA would not ignore persistent falls in housing prices if gauged to be a significant headwind to the broader economy. We expect the RBA Board to deliver modest policy easing in H1 this year (see here), and falling housing prices would, at the margin, make that decision a little easier.

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There are no big red flags that give us particular cause for concern in the housing space in either Australia or New Zealand.

Housing price growth in Australia has continued to slow, barely rising over November. Dwelling price weakness remains most pronounced in Melbourne and prices are also edging lower in Sydney. The number of homes for sale in these cities remains somewhat elevated, but there are early signs that the peak could be in as weaker prices discourage selling.

Despite moderate price growth, growth in housing credit has remained quite solid at around a 6% annualised rate. This could be on borrowed time, however, if dwelling price growth remains tepid.

In New Zealand, the rate of decline in housing prices has slowed. Mortgage interest rates have fallen sharply and the related improvement in new mortgage affordability will eventually support rising housing prices.

Home building approvals have picked up off the lows in both Australia and New Zealand. Nevertheless, further near-term weakness in actual home building construction appears likely, particularly in New Zealand.

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Housing price growth in Australia has slowed in recent months and are currently moving sideways in inflation-adjusted terms. Dwelling prices continue to decline in Melbourne - where for sale listings have increased the most - and prices fell marginally in Sydney in October. For sale home listing activity has lifted noticeably in Sydney.

Despite moderate price growth, growth in housing credit has continued to strengthen, particularly in the investor segment.

Across the ditch in New Zealand, housing prices continue to decline but signs of stabilisation are becoming apparent. Mortgage interest rates have fallen sharply in New Zealand and should support stronger housing price growth.

The residential construction industry has further pain to endure before the cycle turns. While home building consents appear to have stabilised, the low level points to further falls ahead for dwelling investment.

In contrast, the housing construction cycle in Australia has been relatively shallow, in part reflecting capacity and other constraints in the broader construction industry. The pipeline of incomplete dwellings in Australia remains relatively large, but is declining. Home building approvals have risen in recent months, particularly for detached houses, and especially in Western Australia.

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Housing price growth remains solid overall in Australia but prices have continued to decline in New Zealand. For sale home listing activity has increased in Sydney and Melbourne, even after adjusting for seasonality.

Leading indicators point to further declines in new housing construction in New Zealand. In Australia, the housing construction cycle has been relatively shallow, in part reflecting capacity and other constraints in the broader construction industry. The pipeline of incomplete dwellings in Australia remains relatively large, but is declining.

Renovations activity in Australia is poised to strengthen in Australia, with building approvals picking up sharply in Q2.

Mortgage rates have recently fallen sharply in New Zealand amid lower market interest rates and as the RBNZ has flagged the likelihood of a series of OCR cuts. Lower interest rates should stabilise New Zealand’s established housing market before a pick-up in price growth follows.

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Housing price growth remains solid overall in Australia but prices have continued to decline in New Zealand. Listing activity appears to be picking up in Sydney and Melbourne, even after adjusting for seasonality.

Leading indicators point to further sharp declines in new housing construction in New Zealand. In Australia, the housing construction cycle has been relatively shallow, in part reflecting capacity and other constraints in the broader construction industry. The pipeline of incomplete dwellings in Australia remains relatively large, but is declining.

Renovations activity in Australia is poised to strengthen in Australia, with building approvals picking up sharply in Q2.

Mortgage rates have recently fallen quite sharply in New Zealand amid lower market interest rates and as the RBNZ has flagged the likelihood of a series of OCR cuts. Lower interest rates should stabilise New Zealand’s established housing market before a pick-up in price growth follows.

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