Not a 'blip': Sydney and Melbourne property prices go into reverse
The red-hot Australian housing market is showing the first signs of easing since interest rates started rising in May 2022.
The red-hot Australian housing market is showing the first signs of easing since interest rates started rising back in May 2022.
Tim Lawless, Cotality's research director, said the softening hinted at a weaker start to housing trends in 2026.
"Renewed speculation that the rate-cutting cycle is over and the next move from the RBA could be a hike has dented housing confidence," he said.
A "higher for longer" setting on interest rates, mixed with cost-of-living pressures and worsening housing affordability, "looks to have taken some heat out of the market", he said.
Nationally, December saw the smallest monthly increase in house prices in five months, up just 0.7 per cent.
Sydney and Melbourne property markets went backwards by 0.1 per cent in December for the first time since January last year.
Tim Lawless says the Sydney and Melbourne housing markets had been "losing momentum" leading into the end of the year. (ABC News: Nickoles Coleman)
"It's been a little while since we've seen a negative movement," said Mr Lawless. However, he was not surprised because both markets were "losing momentum" leading into the end of last year.
"I think that's a real reflection of … particularly for Sydney, [the] affordability constraints," he said.
While he does not expect dramatic falls, Mr Lawless expects the property market weakness in Sydney and Melbourne to continue this year.
"I don't think this is a blip," he said.
"But I'd be very surprised if we saw a pace of growth across most markets that was as fast as 2025."
Numbers across the country
Despite the softer December outcome, Cotality's Home Value Index (HVI) surged 8.6 per cent in 2025, adding roughly $71,400 to the national median dwelling value.
It is the strongest calendar year gain in home values since 2021, when the market spiked 24.5 per cent amid record-low interest rates and record-high levels of purchasing activity.
Cotality's Home Value Index (HVI) surged 8.6 per cent in 2025, adding roughly $71,400 to the national median dwelling value. (ABC News: Keana Naughton)
In terms of capital city price growth in December, it was a mixed picture.
- Adelaide and Perth saw the strongest gains, both up 1.9 per cent.
- Darwin and Brisbane each gained 1.6 per cent.
- Hobart prices rose 0.9 per cent.