This month’s consumer sentiment survey by Westpac and the Melbourne Institute suggested that homebuyers have gone cold on Sydney property.
As illustrated below by Justin Fabo from Antipodean Macro, homebuyer sentiment has fallen sharply in Sydney, as has dwelling value growth:
Recent auction data is also gloomy.
Last week’s final auction clearance rate for Sydney was only 58.6%, which was the lowest of 2026 and well below the 64.0% final clearance rate recorded in the same weekend of last year:
This weekend’s auction results were more of the same, with Cotality recording a preliminary clearance rate of only 65.1% for Sydney, down from 74.3% last weekend (revised down to 58.6% on final numbers):
Source: Cotality
Melbourne’s preliminary clearance rates were similarly weak.
Reflecting the slower demand, Sydney’s 28-day daily dwelling values index from Cotality has stalled, recording 0% growth:
Recall last week’s updated housing forecasts from Louis Christopher, founder of SQM Research:
SQM Research forecasts that Sydney would experience significant price falls this year (i.e., between -6% and -2%), owing to the Iranian conflict and the upgraded inflation outlook, whereby the interest rate futures market has now fully priced two additional rate hikes in 2026, with the possibility of a third:
We’re now expecting housing price falls in Sydney by the order of up to 6% for the course of 2026″, noted Louis Christopher in his podcast discussing the forecasts.
“Sydney’s economy is driven by its financial services sector in many respects. Unfortunately, financial services as an industry does not do well in times like these”.
“So it’s likely we’re going to see job losses in the financial services sector, which would have a carry-on flow to the local economy, which then in turn affects the housing market”, Christopher said.
Sydney’s mortgage affordability is by far the worst in the nation. This makes Sydney housing especially vulnerable to interest rate hikes:
The average NSW mortgage was $873,000 in the December quarter of 2026, according to the ABS.
If the RBA were to hike the official cash rate four times this year (including February’s hike), the cash rate would end the year at 4.60% and the average discount variable mortgage rate at 6.50%.
As illustrated in the table below, the average new mortgage holder in NSW would face a cumulative increase in repayments of $423 per month from their repayments before the first rate hike in February:
The squeeze on mortgage affordability largely explains why Sydney property is facing price falls as interest rates rise.
