Key takeaways
The RBA has lifted the cash rate again, taking official interest rates to 4.35%, following earlier rises in February and March.
Auction clearance rates fell sharply across the major capitals over the past week, with Sydney at 63.1%, Melbourne at 58.7%, Brisbane at 31.9%, Adelaide at 54.3% and Canberra at 54.5%.
Building approvals fell 11.8% in March, with unit approvals down 26.0%, once again reminding us that Australia’s housing supply problem is not being solved quickly.
This is a more cautious market, but it is also a market where the long-term imbalance between housing demand and housing supply remains firmly in place.
For strategic investors, this is the time to separate short-term sentiment from long-term fundamentals.
There’s been a noticeable shift in the property mood this week.
The Reserve Bank has raised interest rates again, auction clearance rates have pulled back sharply, and the usual headlines are already trying to turn a week of weaker sentiment into a bigger story about the direction of our housing markets.
But as I’ve said many times before, property markets don’t move because of one data point, one auction weekend, or one interest rate decision.
They move because of the interaction between confidence, credit, supply, demand, wages, population growth and the availability of the right type of housing in the right locations.
And this week, Dr Andrew Wilson and I unpacked all of that in our latest Property Insider chat.
Interest rates are rising again
The big news last week was the Reserve Bank’s decision to raise official interest rates by another 0.25%, taking the cash rate to 4.35%.
This follows the February and March increases and effectively reverses the rate cuts we saw through 2025.
What's different about this cycle is where the inflationary pressure is coming from.
The RBA has been quite clear that developments in the Middle East are driving fuel prices higher, and there are real concerns that these higher fuel costs will flow through into broader goods and services pricing over the coming months.
The Bank has also signalled that with three rises already delivered, monetary policy is well placed to respond to developments.
Watch this week's Property Insider chat as Dr Andrew Wilson interprets this as a sign that no further rate rises will occur.
The important context here is that the labour market remains very strong, which is what's giving the RBA the confidence to keep tightening.
They're able to focus on inflation because employment hasn't cracked.
That same strong jobs market is also an important reason why most property owners are continuing to hold, service their loans, and avoid the kind of forced selling that the doomsayers have been predicting.
Home building approvals are still too low
Watch this week's Property Insider chat as Dr. Andrew Wilson explains how national building approvals fell 11.8% in March, following a rise in February.
Unit approvals fell 26.0%, while house approvals rose just 0.9%.
The long term trend in building approvals remains weak, particularly when you consider how much housing Australia needs to accommodate population growth and household formation.
Of course, not all dwellings that are approved get built.
And even though the Federal Budget will give tax incentives for investors to buy new dwellings, just because buyers get a tax deduction doesn't mean that developers will build more dwellings.
You see…when borrowing costs rise, developers struggle to make new projects financially viable.
When construction costs remain high, many apartment projects don’t stack up.
When approvals remain weak, fewer homes get built in two or three years’ time.
So the policy tool used to slow inflation will also delay the new supply needed to ease housing pressure.
That’s one of the uncomfortable realities of the current cycle.
Auction Clearance Rates Plunge as Interest Rates Rise Again
Watch this week's Property Insider chat as Dr. Andrew Wilson explains how capital city auction clearance rates fell sharply over the past week, reflecting market sentiment regarding the third consecutive increase in RBA official interest rates.
- Also read:National Vacancy Rate Rises to 1.2%| SQM Research
- Also read:Interest Rates Rise Again and Auction Markets Pull Back – What It Really Means for Property | Property Insiders
- Also read:This week’s Australian Property Market Update – Latest Data, State by State May 12th 2026
- Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To Now After The Rate Rise.
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – May 2026
The national weekend auction market reported an average clearance rate of just 52.5% over the past week which was lower than the 57.3% reported over the previous week and well below the 63.8% reported over the same week last year.
Auction numbers were also generally lower over the past week with the rising prospect of falling market activity reflecting the anticipated impacts of next weeks Federal Budget.
Markets don’t like uncertainty.
Buyers and sellers can handle bad news more easily than uncertain news, because at least they can price bad news into their decisions.
Around Budget time, people start worrying about tax changes, investor policy, housing incentives, migration settings, construction programs and anything else that might affect property values or cash flow.
Most of the time, the fear turns out to be worse than the final policy.
What this really means for property investors
I see this as a market that is becoming more selective rather than one that is turning broadly weak.
That distinction matters. Rising interest rates will affect some buyers more than others.
They will have a bigger impact on first-home buyers with limited borrowing buffers, recent purchasers who stretched themselves, highly leveraged investors, and secondary locations where demand is more discretionary.
But high-quality, well-located properties in tightly held suburbs will continue to be underpinned by scarcity.
That’s why I don’t think investors should make decisions based only on this week’s clearance rates.
Instead, they should watch the deeper signals.
Where are household incomes strong? Where is new supply difficult to add? Where is the local demographic profile improving?
Where is owner-occupier demand deep enough to support values through slower parts of the cycle?
Those questions matter more than whether one weekend’s auction clearance rate was a few percentage points lower.
The latest rate rise has changed short-term sentiment, but it hasn’t changed the bigger housing story.
Australia still has too few homes. Building approvals are still weak. Rental markets remain under pressure in many locations. Construction remains difficult.
And the best-located properties are still scarce.
So yes, the next few months may be bumpier.
We may see weaker auction clearance rates, slower transaction volumes, and more cautious buyers.
But experienced investors understand that markets often feel most uncomfortable just when better opportunities start to appear.
The key is to avoid being distracted by weekly noise while still respecting the risks.
This is a market for strategy, selectivity and patience.
It’s also a market where the gap between average assets and investment-grade assets is likely to widen.
That’s why, in my mind, the investors who will do best over the next stage of the cycle won’t be those who simply buy because prices have softened.
They’ll be the ones who understand where demand will remain strong, where supply will remain constrained, and where today’s uncertainty is creating tomorrow’s opportunity.
