Rate rises on the table. 2026 Australian Property Market will flip (not what you think) EP121

Right now, Australia’s property market is splitting in two. Sydney and Melbourne have suddenly cooled—two places that used to feel like the safest, easiest buys. But at the same time, three mid-sized cities have seen prices skyrocket. That isn’t a coincidence. It’s a signal. And it’s a dangerous one. Because the data is telling us the tailwind from rate cuts has been used up. And a rate-hike storm is quietly building in the background.

Fresh November numbers from the Australian Bureau of Statistics just dropped: inflation has bounced back, unemployment hasn’t cracked—it’s holding up—and the migration wave is still rolling in, month after month.

That leaves the RBA stuck in the middle, with no clean way out. And what that means is simple: the price growth that’s been “fed” by policy support may not keep running at the same speed. It may even start to weaken.

In this episode, I’m going to pull apart the truth behind the November market, the pressure point in Australia’s economy, the strangest pivot ahead of the December RBA meeting—and my bold call on where Australian housing could be heading in 2026. If you still want to make money on Australian property, you’ll want to keep watching.

November Market Lost Momentum

No fluff—let’s go straight to the numbers. In November 2025, Australia’s housing market kept rising, but it broke the nine-month run of accelerating growth. For the month, the national market was up just 1%. The direction hasn’t changed, but the speed has eased, likely because rate-cut expectations are fading.

Earlier this year, most people couldn’t see where the broader market was headed. Then the February rate cut hit, and the market started to rebound. The May cut clarified the direction and accelerated the upswing. After the third cut in August, that acceleration continued—but there were no cuts in September, October, or November, so it’s not surprising the market’s pace cooled a bit in November.

In Sydney, prices rose 0.5% in November—slower than in September and October, but still rising. It just looks like Sydney may have already passed the peak of this upswing. Melbourne dropped sharply to 0.3%, basically back to a flat phase. It was the slowest monthly growth in the country. Melbourne’s 0.9% rise in October may end up being the one standout moment in this cycle.

The mid-sized city trend hasn’t changed. Brisbane, Adelaide, and Perth have now been rising for more than two years straight. Their growth rates bottomed in February, but even then, prices were still rising. After that, they accelerated for seven consecutive months. In November, Brisbane rose 1.9%, still speeding up. Perth jumped 2.4%—the fastest monthly growth in Australia, completely off the charts. It’s hard not to think about the agents who were calling for an “exit Perth” strategy earlier this year. Adelaide rose 1.9% as well—also very fast.

The three smaller markets are a bit more mixed. Hobart hasn’t formed a clean uptrend. Over the past two years, it’s bounced up and down, but the direction is improving—and November was up 1.2%, its fastest pace in this cycle. Darwin kept surging, up 1.9% for the month. Canberra also ticked higher, with monthly growth rebounding to 1.0%. Overall, Darwin and Canberra look especially sensitive to interest rates: cut rates, and they jump; stop cutting, and the pace cools off.

Everything above is the month-to-month movement by city. But if you want to see the underlying trend, the best tool is the 90-day moving average. Stretch the view to a full quarter, and the noise calms down—the direction becomes clearer. And it’s very clear here: the big cities and mid-sized cities are already in an upswing. Hobart used to bounce around, but it’s now in an upswing, too.

Those five green circles on the chart mark the five points over the past five years when I made market calls. All five predictions were correct.

If you’ve been watching our monthly livestreams, you’ve seen the full process—call, then verification in the data. The recordings are all on the channel. If you’re the type who likes to fact-check, you can go back and dig them up.

As of this episode, Sydney, Brisbane, Adelaide, Perth, and Darwin are all at all-time highs. Melbourne is still 0.9% below its March 2022 peak. Hobart is 6.9% below its peak, and Canberra is 2.4% below. Melbourne and Canberra will likely hit new all-time highs by no later than the end of Q2 next year. And that’s when it gets interesting: eight major cities, and seven sitting at record highs.

I’m curious what the people who automatically decide “I won’t buy” the moment they hear “all-time high” will do then. A lot of people hear that phrase and hesitate: If it’s already at a record, how much upside can there be? But look back—two and a half years ago, plenty of people sat out Perth and Brisbane because they were “at all-time highs”, and they’ve regretted it ever since.

Australia’s property market moves up and down in the short term, but over the long term, it keeps rising. If you’re bearish on Australian property for the long run, you probably haven’t understood what investing really is: buy, hold long term, and let compounding do its job. That’s the approach that fits most people.

By the end of November, the national auction clearance rate had fallen to 60%. That’s the third straight month of declines. Sydney and Melbourne dropped the most. Brisbane and Adelaide have been relatively steady. This is a sign that Sydney and Melbourne are entering a phase of re-pricing in transactions. And if this trend continues, sellers who are holding out for top dollar will have to start making concessions to match the market.

2025 Year-End Wrap

Across 2025, Australia’s overall property market rose 7.7%—a touch lower than what I forecast at the start of the year. And if you zoom out and look at the pattern over the past 20 years, you’ll notice something important: there were only four years where prices fell. The other sixteen years were up. The worst drop was -6.1% in 2008, and then -4.9% in 2022, after the post-pandemic surge and the pullback that followed.

It once again proves the line we use to summarise Australian property: short-term moves up and down, long-term keeps rising. In a market like this, staying bearish doesn’t make you money. The people who do well are the ones who can stay bullish for the long haul.

If you look at the chart of monthly moves from the start of this year to now, a few patterns jump out: 1.The overall uptrend kept speeding up. 2.The three pullbacks all lined up with periods where rate cuts paused. 3.The November slowdown—combined with growing expectations that there may be no more cuts ahead—could be the turning point for the market’s growth rate.

Another clear trend in 2025 is that low- and mid-priced properties rose faster in percentage terms than high-end homes. You can read that as a nationwide “catch-up” across the cheaper parts of the market, driven by affordability pressure. But I need to stress this: in my experience, that kind of pattern can’t last indefinitely. First, low- and mid-priced homes are also becoming less affordable—eventually, they push beyond what even more buyers can handle. Second, historically, premium property often posts the higher percentage gains in most years. So sooner or later, that gap tends to close and the old pattern returns.

We also saw investors getting more aggressive through 2025. In Q3, investor loans made up 40.6% of new lending—well above the past 10-year average of 33.4%. That 40.6% is also the highest level since December 2016.

When investors enter the market together like that, they can push prices up quickly. And not long after, you typically see regulators step in.

Right at the end of this year, APRA announced a tightening: loans with a DTI above 6 times can’t exceed 20% of lending, with the rule starting in February next year. It may not hit the market hard immediately, but it’s a clear signal—a new round of credit tightening has begun.

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Rate Cuts Paused

On 9 December, the Reserve Bank held its final meeting of the year. As expected, it kept the cash rate at 3.6%. But what shocked the financial markets wasn’t the decision. It was the message. At the press conference, the Governor basically shut the door on more cuts. The wording was blunt: for the foreseeable future, rate cuts aren’t even on the table. The Board is thinking about only two options now—stay put, or decide when to start hiking again. The moment that landed, the market went crazy. Just weeks earlier, people were still guessing whether we might get one more cut in the first half of next year. Now the wind has completely changed direction. Futures markets have started pricing in a possible hike around May next year, with the probability pushed close to 100%. So what caused this 180-degree turn?

Start with jobs. In November, Australia’s unemployment rate held at 4.3%, which looks healthy on the surface. But the detail is where the cracks show. Employment actually fell by 21,300, the biggest drop in nine months. Full-time jobs plunged by 57,000, and the only reason the headline didn’t look worse was that part-time jobs rose by 3,500. The RBA’s takeaway is still: the labour market remains tight. Hiring is still difficult, capacity utilisation is above its long-run average, and wage growth—while off the peak—is still running at 3.4% year-on-year. In the RBA’s eyes, that still fuels inflation.

Inflation is the centre of this pivot. In October, headline CPI rose 3.8% year-on-year, up from 3.6% in September. The RBA’s key measure, trimmed mean CPI, lifted to 3.3%. Both are above the 2%–3% target band. And here’s the part that really worries them: if you annualise October’s monthly pace, inflation comes out at roughly 4%. At the press conference, the Governor said the RBA is genuinely concerned about the current inflation level. Yes, some price rises may be temporary—but there are also signs inflation is lifting across a wide range of categories, and some of those items are likely to keep rising.

It’s not just jobs and inflation. Q3 GDP grew 2.1%, the fastest pace in two years. Private investment jumped 2.9%. Household spending is improving, and retail sales in November rose 0.8% month-on-month.

And housing is back in the spotlight too. Prices have been rising, capital-city values are up more than 9% year-on-year, and the median is now pushing towards $970,000. The RBA’s statement specifically mentioned the ongoing lift in property activity and prices—clearly one of the inflation risks they’re watching.

There was also one line in the official statement that really matters. In the past, they’d say risks were “balanced”. This time, the wording changed to: inflation risks are tilted to the upside. In the central banking language, that’s a rare and loud signal. The statement also noted that inflation has come down from its peak, but has started to lift again. Financial conditions have loosened since the start of the year, and the impact of earlier cuts hasn’t fully flowed through the economy yet—so the Board says it has to stay cautious.

Most media outlets are reading it the same way: the easing cycle is done. Reuters reported that all 38 economists in its survey expected no change in December—but the post-meeting outlook shifted sharply. Among 33 respondents, 19 now think there will be no cuts at all next year, and four are calling rate hikes. Bloomberg’s headline was even more direct: the Governor has effectively ruled out further cuts. Local coverage went further—some analysts are already talking about a May hike to 3.85%, then another hike later in the year.

As of 7 December, the big four banks all expected December to be on hold. But their 2026 views are starting to split. Westpac remains the optimistic one, still forecasting two cuts in 2026—May and August—down to 3.1%. But CBA, NAB, and ANZ are far less confident. Their view is that 3.6% may hold through the first half of 2026, possibly longer. And honestly, don’t be surprised if the banks start revising again soon—another reminder of how unreliable “bank forecasts” can be when the data turns.

Market reaction has been dramatic. The 10-year government bond yield jumped to 4.61%, the highest since January. Rate futures now price in a hike by around May, and the odds of another hike before year-end have also risen. If we really got two hikes, the cash rate would be back around 4.1%, wiping out the benefit of this year’s three cuts.

Even major global players are shifting tone. A BlackRock strategist put it plainly: they no longer expect further cuts—when inflation is above target, the central bank can’t ignore it.

Here’s something many people missed: Australian and US rates are now basically level. On 10 December, the US Federal Reserve cut 25 basis points, taking rates to 3.5%–3.75%. Australia is holding 3.6%. The gap is now almost nothing. This hasn’t happened since 1983. Historically, around 85% of the time, Australia’s rate has been higher than the US—partly to attract global capital. That advantage has now faded, and the Australian dollar is under pressure, hovering around USD 0.66. A weaker currency lifts import costs, which can then feed straight back into inflation. It’s a nasty loop.

2026 Predictions

Looking into 2026, analysts are now split into three camps: A small group still expects more cuts. The mainstream view is no change all year—that’s broadly where CBA, NAB, and ANZ sit. A third camp has appeared, calling hikes as early as February, with two hikes by mid-year. Everything hinges on the Q4 inflation data released on 7 January. If quarterly inflation comes in above 0.8%, then the 3 February RBA meeting could bring a real shock. My view is simple: watch inflation and unemployment. If inflation keeps rising and unemployment stays firm—and that’s what the direction currently suggests—then a hike becomes a question of when, not if. I think there’s a real chance we see at least one hike before June next year.

Even with uncertainty around rates, major forecasters still expect prices to make new highs next year. Domain: up 6% in 2026 (same as Westpac), SQM Research: up 6%–10%, ANZ: up 5.8%, CBA: up 4%. Personally, I lean towards 6%–7% for the year—Sydney and Melbourne softer, and Perth, Brisbane, and Adelaide doing more of the heavy lifting.

And here’s my bold call: as detached houses become more and more unaffordable, the apartment market could warm up in 2026. In some key areas of the major cities, apartment price growth could even outpace house prices for a period. But my investment philosophy doesn’t change. Australian property is a long game—it rewards the person who can hold the longest. Apartments may have a stronger burst in the short term, but over the long run, I don’t believe they outperform detached houses. If you can afford it, the best “buy and hold” asset in Australia is still the detached house. If your budget allows, don’t hesitate—houses remain the first choice.

Watch the video version of the blog on YouTube.

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