Key takeaways
If migration is easing, why is demand for property still so strong?
Sure, the post-pandemic surge in overseas migration is now easing, but that doesn’t mean its impact on housing demand has suddenly disappeared.
Regional Australia is no longer a single “boom or bust” narrative, but some regional markets have strongly outperformed their capital city counterparts.
The auction markets finished December strongly suggesting they are going to commence 2026 with strong momentum.
Just when it looked like confidence was returning to Australia’s housing market, the Reserve Bank has thrown another curveball.
The latest ABS figures show home loans rising strongly - including a surge in first home buyer activity - suggesting buyers were starting to lean back into the market.
But here’s the catch…those lending figures were recorded before the most recent interest rate rise.
So the big question is: Are we seeing the early stages of a new property upswing, or was this simply the last burst of optimism before higher rates bite again?
Because when interest rates rise, it’s not just borrowing capacity that falls - it’s buyer confidence.
And confidence is what moves property markets.
This is what Dr. Andrew Wilson and I discuss in this week's Property Insiders chat as well as the latest building approvals and auction clearance results which suggests the supply problem isn’t just continuing - it may actually be getting worse.
Buyers are back… but did the RBA just kill the momentum?
Watch this week's Property Insider chat as Dr. Andrew Wilson and I explained that there is a real tension playing out in Australia’s property market right now.
On the one hand, the latest Australian Bureau of Statistics (ABS) lending data shows a notable rise in home loans, first home buyers returning, and investor activity picking up.
However, these figures are backward looking and are for the December 2025 quarter.
On the other hand, the Reserve Bank has just lifted interest rates again, which inevitably chills sentiment and borrowing capacity.
That’s the conflict at the heart of the market today - rising credit demand colliding with rising borrowing costs.
Home loans are rising
According to the ABS, total home loan commitments rose 5.1% in the December quarter and were up 13.4% over the year.
First home buyers were a big part of that story, with their loan commitments climbing 6.8% over the quarter.
Of course, that's not surprising, given the government's first-home owner incentives, kicked in with a 5% deposit in October last year.
Interestingly, investor loans grew 5.5% and owner-occupier loans lifted 4.8% over the quarter.
At face value these look like strong signs of renewed confidence.
But these figures reflect activity before the RBA’s most recent rate rise.
They’re looking in the rear-view mirror at a time when borrowing costs had not yet moved higher.
That timing mismatch matters because credit conditions and buyer psychology can shift quickly once rates rise, even by a quarter point.
Borrowers reassess, lenders tighten policies, and suddenly a market that looked like it was gathering momentum feels fragile.
First Home Buyers back, but at a price
There’s no doubt that first home buyers have entered the market in meaningful numbers.
The 6.8% quarterly increase in first home buyer loan commitments suggests young and aspiring homeowners were responding to improved affordability and government incentives.
- Also read:This week’s Australian Property Market Update – Latest Data, State by State February 17th 2026
- Also read:Melbourne housing market update | February 2025
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – February 2026
- Also read:National Weekly Auction Report – February 7th 202t | Auction Markets Steady Despite Surge in Listings and Higher Rates
- Also read:Australian housing market update | February 2026
With rates now a little higher, and the cost of living pressures still front of mind for many households, the risk is not just that first-time buyers can afford a place - it’s whether they can afford to keep it without stretching themselves too thin.
As you'll hear in our discussion, both Dr. Andrew Wilson and I believe first home buyers will remain a strong force in the markets this year despite these challenges.
Investors quietly returning
The increase in investor loan commitments is significant because it suggests that some of the market’s traditional drivers are coming back to life.
A 5.5% quarterly rise in investor loans indicates emerging confidence in the future growth of property values.
Watch this space carefully. If investor lending continues to rise in subsequent quarters, it could signal that the supply-demand imbalance is becoming the dominant force in the market again, even in a higher-rate environment.
This is not a picture of a crashing market, as some property pessimists are predicting after the interest rate rise.
We are in a market in transition - one where the relationship between confidence, rates and supply will determine whether the recovery we saw late last year continues, stalls or evolves into something stronger.
Supply still tight and that’s going to matter
While the ABS lending data paints a picture of returning demand, the supply side of the equation remains strained.
Watch this week's Property Insider video as Dr. Andrew Wilson explains how building approvals have recently shown volatility, and dwelling construction hasn’t kept up with underlying population growth.
That imbalance remains one of the longest-lasting forces shaping prices and rents.
Home building approvals fell 13.8% over December, following 12.5% November rise
Apartment approvals are more volatile and fell 29.8%, while building approvals for houses was up 0.4%.
There's nothing new about this. We're just not building enough accommodation.
Building approvals for new homes are down 26% since their peak in 2016, and those for apartments are down 41% since the building boom of 2016.
Auction markets steady despite surge in listings and higher rates
As always, Dr. Andrew Wilson and I discussed the weekend's auction results, because they give a good in-time indication of what's happening on the ground.
This weekend, our auction markets reported steady results overall, despite the usual surge in early-year listings and the added impact on confidence from recent increases in official interest rates.
The national weekend auction market reported an average clearance rate of 69.0% over the past week, slightly lower than the 71.0% reported the previous week but again higher than the 64.3% reported for the same week last year.
Auction listings will continue to increase over the coming weeks, particularly in Melbourne, but the last two weeks’ results continue to reflect solid market confidence and buyer depth, despite higher interest rates.
Sydney recorded a clearance rate of 73.9% over the past week, well below the 82.1% recorded the previous week and lower than the 78.8% reported for the same week last year, but on a very large number of properties put to auction (1,009).
Melbourne recorded a clearance rate of 69.5% over the past week, which was nearly the same as the 69.6% recorded over the previous week ,but slightly lower than the 71.7% reported over the same week last year.
