RBA Interest Rate Hike Expected to Slow Property Price Growth

As property prices continue to rise across Australia, a shift in market dynamics is anticipated due to possible interest rate hikes. The latest Cotality Home Value Index indicates a national increase of 0.8% in January 2026, reflecting a median home value of $912,465. While the growth is buoyed by affordable housing options, experts suggest the pace may soon slow.

Current Market Landscape

The demand for lower-priced homes has been driving the growth in property values. Lower quartile house values saw a notable increase of 1.3% in January, while upper quartile values grew marginally by just 0.3%. Tim Lawless, research director at Cotality, attributes this trend to heightened competition for affordable housing among first-time buyers and investors.

City-by-City Performance

• Sydney: Home values rose by 0.2%, but remain 0.1% below November 2025 peaks. The median price stands at $1,290,537.
• Melbourne: Experienced a slight increase of 0.1%, still 0.7% below record highs from March 2022.
• Perth: Led the capital cities with a 2% increase.
• Brisbane: Increased by 1.6%.
• Adelaide: Up by 1.2%.

Despite these gains, the overall property market faces challenges. The inventory of homes for sale has decreased by 19% compared to the previous year and is 25% below the five-year average. Lawless states that these trends indicate persistent low supply amid high demand, yet forecasted economic conditions suggest an impending slowdown.

Anticipated Interest Rate Hikes

The Reserve Bank of Australia (RBA) is under pressure to implement interest rate hikes, especially in light of recent inflation data. Market analysts estimate a 76% probability of a 0.25 percentage point increase following the RBA’s monetary policy meeting. UBS economist Stephen Wu projects two rate rises in 2026, starting imminently.

Implications for Property Prices

After three interest rate cuts last year stimulated the market, the anticipated hikes could dampen growth rates. Wu forecasts a moderate increase in home prices, estimating a rise of 4% to 5% for the year, influenced by affordability constraints and rising unemployment. While decreases in home prices are not expected, the growth rate is likely to decelerate significantly.

Considering the economic indicators, it is clear that the RBA’s impending decisions will play a crucial role in shaping the future of the property market. Homebuyers and investors must stay vigilant in light of these developments.