Rate hold

Markets forecast virtually no chance of a rate hike today and the RBA delivered. Before today’s decision markets had priced in ~98% chance of no change, with all big four banks forecasts falling in line.

The recent run of softer than expected inflation and growth data combined with a rising unemployment rate has supported the case for a pause.

The big change in recent weeks has been the widely held expectation of at least one more rate hike being a certainty (and possibly two), disappearing. Past today’s decision to hold, markets now only have ~60% chance of one further rate hike priced in. A much more doveish view than just 3 weeks ago.

So, there is a real possibility we are at the peak of the rate cycle, having reversed all of 2025’s cuts. What is the outlook for property?

We’ve always held that it’s the rates outlook that has the biggest impact on our views for 2026 and into 2027. The fundamentals across most markets don’t change quickly and remain strong. Demand exceeds supply in most markets and the Federal Budget impacts on residential markets have been overblown.

We are seeing some weakness in residential markets in the June quarter, but that’s largely due to the delivery of rate hikes and the expectation of more. Lower consumer sentiment due to the budget changes is playing some part, but once the rates outlook stabilises and consumers feel the next move is down, dwelling price growth will recover.

Land market volumes were already easing in the March quarter and we’ve seen some further easing in April and May, but nothing catastrophic. Indeed, price growth in most markets remains very strong as demand remains robust.

Clearly the outlook for property for next quarter or two is worse than it was before the Middle East crisis began and the seeming surprise by some sectors over widely telegraphed changes to investor taxation for residential property has seen overall sentiment fall. But with the outlook for rates for the remainder of 2026 and into 2027 stabilising, we expect to see a return to the pre-crisis path of activity in late 2026 and into 2027.

ENDS

Media enquiries to:

Mitchy Koper
Oliver Hume
M.koper@oliverhume.com.au 
0417 771 778

Lilly Mackay
Oliver Hume
l.mackay@oliverhume.com.au