Rate decision rains on spring selling season

The result marked the fourth rate rise of 2026, reaching its highest level in 15 years after the RBA held firm at their previous meeting in August.

The Board said short-term measures of inflation had remained elevated, with some upside risks flagged in August beginning to materialise.

According to the Board, the three increases in the cash rate target in 2026 have held financial conditions and slowed the economy, but further tightening was warranted to support inflation’s return to target.

Despite having already increased the cash rate four times, the RBA refused to rule out further cash rate hikes.

“The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target if needed.”

“Accordingly, the Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions.”

The cash rate decision aligns with the big banks’ forecasts, with all four recently adjusting their predictions to a September rise.

Data from Cotality found that the four rate rises of 2026 have reduced borrowing capacity by nine per cent, the equivalent of around $90,000.

Property market loses steam

According to LJ Hooker head of research Mathew Tiller, the latest rate hike would likely take the wind out of the sails of the spring selling season.

He said that price growth would likely be subdued for the latter stages of 2026, though limited housing supply and a tight rental market should reduce the risk of a major downturn.

Tiller said that communication and vendor management would likely become key skills for agents as hesitation creeps into the market.

“Sellers will need to meet the market, particularly where listings are rising and buyers are becoming more selective,” Tiller said.

“This means setting realistic price expectations and ensuring the property is well presented and stands out from the competition.”

He said that with confidence weakening and household budgets stretched, some owners will be forced to transact due to personal circumstances.

Tiller said those situational sellers would have less flexibility in the timing of their transaction, and would have to adjust their expectations to fit the current situation.

While investors could stay on the sidelines because of the tax changes, buyers with the capacity to act could see an opportunity.

“Upsizers who can manage the larger repayments may find opportunities in the current market and have more room to negotiate,” Tiller said.

Decision piles pressure onto property market

According to Real Estate Institute of Australia President Jacob Caine, the cash rate increase would compound the financial strain many in the nation’s housing market are already feeling.

Additionally, he said it would adversely affect potential buyers, particularly in the first-home buyer market.

“Today’s increase is another difficult blow for households already dealing with higher mortgage repayments and sustained cost-of-living pressures,” Caine said.

“This will make the path to home ownership harder, particularly for first home buyers trying to save a deposit while paying high rents.”

Domain chief economist Nicola Powell said the increased cash rate could spell trouble for the construction industry, particularly for delivering new homes.

“Building approvals remain subdued, but that’s not because construction activity has disappeared,” Powell said.

“Housing is increasingly competing with infrastructure, renewable energy and data-centre projects for the same workers, materials and resources.”

Cotality said that if the RBA follows September’s rate rise with another in November, housing conditions would likely weaken as borrowing capacity falls further.

“Housing turnover is likely to remain below average as both buyers and sellers adjust to a prolonged period of elevated borrowing costs,” Cotality said.

“Even if today’s increase proves to be the peak of the cycle, housing markets are unlikely to find meaningful support until there is greater confidence that interest rates have stabilised and an easing cycle is approaching.”

Investors treading water

Knight Frank chief economist, research and consulting Ben Burston, said inflation pressures in the Australian market were consistent with those seen elsewhere, with the RBA decision echoing recent moves from other major bodies.

Despite the cash rate rise threatening to cool the national market, Burston said he anticipated investor demand to remain resilient in the new conditions.

“The shift follows the recent spike in bond yields globally, and property markets are having to digest a renewed period of uncertainty as investors reappraise pricing and return metrics given the higher cost of capital,” Burston said.

“Higher rates present a headwind for near-term performance, but higher inflation and a resilient economy are also driving strong income growth across multiple sectors, so we expect investor demand will remain solid heading into 2027.”