RBA Interest Rate Hike: What Does It Mean for the Property Market in 2026?
Q: What decision did the RBA make in early 2026?
The Reserve Bank of Australia (RBA) increased the cash rate by 0.25%, taking it to 3.85%. This was the first-rate hike since November 2023.
Q: Why did the RBA increase interest rates?
The RBA acted due to:
- Higher-than-expected inflation
- Rising rents
- Increased insurance and energy costs
- A strong labour market
These factors left little room for the RBA to ease monetary policy.
Q: Does this mean property prices will fall sharply?
No. According to Domain’s Chief of Research, Dr Nicola Powell, Australia’s ongoing housing supply shortage will continue to support prices. While higher interest rates slow buyer activity, a sharp price correction is unlikely.
Q: How will higher rates affect buyers?
Higher interest rates reduce how much buyers can borrow. This means:
- Buyers may feel less urgency
- Auctions may become less competitive
- Negotiations may take longer
In cities like Sydney and Melbourne, where buyers are more sensitive to rate changes, price growth is expected to moderate through 2026.
Q: How much borrowing power are buyers losing?
According to Cotality (formerly CoreLogic), a median‑income household may lose around $18,000 in borrowing capacity. This could push some buyers to:
- Consider more affordable suburbs
- Look at regional areas close to capital cities
- Shift from mid‑tier homes to lower‑priced properties
Q: Will buyer demand disappear?
No. Property experts agree that demand will slow, not stop.
LJ Hooker’s Head of Research, Mathew Tiller, notes that:
- Population growth remains strong
- Housing supply is still limited
- Investor interest continues
As a result, prices are expected to keep rising, but at a slower pace, with homes spending more time on the market.
Q: What does this mean for sellers?
Sellers should be prepared to:
- Be more flexible in negotiations
- Price homes realistically
- Understand that buyers are now more budget‑conscious
Well, ‑priced properties will continue to perform strongly, while overpriced homes may sit on the market longer.
Q: Are distressed sales expected?
No. Experts suggest most homeowners were prepared for a rate increase. Only sellers choosing to downsize or reposition are likely to sell, rather than being forced to do so.
Q: What about the upcoming selling seasons?
Our observation shows:
- Listings rose nearly 40% since December 2025
- Property appraisals jumped 75% month‑on‑month
- Buyer attendance at open homes increased 3% year‑on‑year
This points to a strong autumn selling season rather than a market downturn.
Q: How does this impact commercial property?
Knight Frank reports that while the rate hike may slow yield compression, commercial property remains well supported due to:
- Limited new supply
- Strong rental growth
Office markets in Sydney, Brisbane, and Adelaide are already seeing improved rental performance.
Conclusion: What Should Buyers and Sellers Do Now?
The 2026 interest rate hike signals a shift toward a more balanced and cautious property market, not a collapse. While borrowing power has reduced, strong population growth, limited housing supply, and ongoing demand continue to support property values.
At Wakim Realty, we believe understanding local market conditions is more important than ever. Whether you are buying, selling, or simply seeking clarity, working with an experienced agent who understands how buyers react to interest rate changes can make all the difference. A well‑timed strategy and accurate pricing remain key to achieving strong results in chan