Last month, Louis Christopher, the founder of the property analytics firm SQM Research, published updated home price forecasts for 2026, presented below.
Source: SQM Research
As you can see, SQM Research’s base-case forecast for Sydney and Melbourne is that both cities will record dwelling price declines of -1% to -6% in 2026.
However, this base case was built on the expectation that the official cash rate would rise to 4.35% by mid-2026, indicating one more 0.25% increase from the Reserve Bank of Australia (RBA).
The latest pricing in the interest rate futures market indicates the RBA will deliver at least two more rate hikes, leaving the official cash rate at 4.60% by year’s end.
If these forecasts were to come to fruition, they would bring “scenario 2” into play, in which SQM Research forecasts steeper price falls for Sydney and Melbourne between -4% and -9%.
The latest housing market data matches SQM Research’s forecasts. Last weekend’s final auction clearance rates for Sydney and Melbourne were unambiguously weak, suggesting that buyer demand has evaporated.
Source: Cotality
Sydney’s final clearance rate of 48.8% was the lowest result recorded since April 2020, when clearance rates crashed amid the onset of the COVID-19 pandemic.
Melbourne’s final auction clearance rate of 52.3% was a little stronger, but still down by 9.9 percentage points from the same weekend last year.
Monthly average clearance rates across Sydney and Melbourne have also collapsed, as illustrated below:
Sydney’s average clearance rate of 50% in April is the city’s weakest since April 2020, while Melbourne’s clearance rate of 54% in April is the weakest since July 2022.
Cotality’s daily dwelling values index has also recorded accelerating price falls for Sydney and Melbourne of 0.4%, respectively, over the past 28 days, which is dragging down value growth at the 5-city aggregate level:
Thus, the latest available auction and price data suggest that the property downturns in Sydney and Melbourne are accelerating.
For now, at least, SQM Research’s dwelling price forecasts for both cities remain on target.
