Housing market 'levelling out' as interest rate hikes place pressure on buyers

Australia’s housing market is showing signs of cooling as the Reserve Bank of Australia (RBA) lifted the cash rate to 4.35% this week, its highest level since February 2025. The 0.25 percentage point increase follows a series of rate hikes that have slashed prospective buyers’ borrowing capacity, forcing many to reconsider their budgets or rush into purchases before further rises. First-time buyers Sri Sankari Ravindran and Akshaya Anandan secured their first home in Adelaide’s northern suburbs after a six-to-eight-month search, spurred by the latest rate hike. They re-evaluated their finances, fearing further increases would push their repayments beyond affordability. ‘A couple of days ago we thought OK, this is how much it’s gone up by, and if it raises again we’re in a bit of a pickle,’ Anandan said. Meanwhile, Hossein Ranjbar, also in South Australia, has struggled to compete with wealthier buyers, losing offers on properties due to tighter budgets. Real estate agents across Adelaide and Sydney report growing buyer hesitation, though demand remains strong compared to pre-pandemic levels. Ray White agent Nick Borrelli noted uncertainty among buyers in Adelaide’s inner north-eastern suburbs, while Raine and Horne’s Allana Kazzi observed auction clearance rates in Parramatta drop to their lowest since 2020. ‘There’s still a lot of people on the market, but they’re very hesitant buyers,’ Kazzi said, adding that higher rates force buyers to be more selective. Property data firm Cotality confirms demand is softening, particularly in mid-sized capitals, with growth slowing amid elevated interest rates. South Australian auctioneer Brenton Ilicic suggests the market may not drastically shift with each rate rise, though buyers face higher repayments. The Albanese government’s upcoming budget on May 12, expected to include changes to capital gains tax discounts and negative gearing, could further influence market dynamics. While post-COVID price surges have stabilized, agents describe a ‘levelling out’ in activity. Borrelli acknowledged demand remains, but not at the frenetic pace seen six to 12 months ago. The combination of higher rates, budget uncertainty, and competitive bidding continues to reshape Australia’s property landscape, leaving first-time buyers and investors alike recalibrating their strategies.