Author: Ross Turner, General Manager - Australian Valuation Operations
Importantly for property markets, the RBA also observed that housing activity and prices have continued to pick up, a reminder that last year’s easing in financial conditions had been feeding back into demand. In practice, a single 25bp move rarely “reprices” property overnight, but it can change serviceability margins, buyer psychology and transaction conditions quickly.
Ross Turner, General Manager – Australian Valuation Operations at Opteon, said rate shifts like this typically show up first in how buyers transact rather than in immediate headline value moves. “In our experience, the earliest signals tend to appear in auction outcomes, selling times and discounting, before they become visible in broader value measures,” he said.
Recent national indicators show values were still rising through late 2025 (up 2.9% over the December quarter and up 8.6% over calendar 2025) but the pace of growth was easing into early 2026, with near-term measures indicating Sydney and Melbourne softening slightly while growth in other capitals moderated. At the same time, advertised supply remained materially constrained: total listings ended the year about 20.6% below the five year average, with conditions described as skewed toward sellers across most regions (source: Cotality).
Ross Turner said that mix - tight supply but higher borrowing costs - often produces a market that becomes more segmented. “We tend to see dispersion widen: well-located, A-grade homes continue to transact up to certain value thresholds depending on the market while secondary stock and highly leveraged buyers meet firmer affordability ceilings,” he said. Auction metrics already hinted at softer momentum into year-end, with the weighted clearance rate easing into December, in line with slower value growth through the same period. Localities with high debt profiles are also more likely to experience mortgage stress and a rise in forced sales scenarios. Auction metrics already hinted at softer momentum into year-end, with the weighted clearance rate easing into December, in line with slower value growth through the same period.
In commercial property, rate changes flow more directly into funding costs influencing cap rate expectations, feasibility and transaction velocity—particularly for leveraged buyers and development-led deals. (RBA SMP – Financial Conditions) The RBA’s February forecasts also embed a higher expected rate path than previously assumed, reinforcing the likelihood of a more cautious investment lens until inflation and demand are clearly back in balance.
Ross Turner said this is where value outcomes can diverge sharply by asset quality. “When rates move up, the market typically pays a premium for income durability. WALE, covenant strength and leasing risk become central to value. That’s where we expect the biggest separation between prime and secondary assets,” he said.
The next phase will hinge on three things: whether inflation validates the RBA’s concern, how quickly credit conditions transmit into borrowing capacity, and whether supply remains as constrained as it has been. At present, the market isn’t anticipating a sudden reset. Instead, it’s transitioning toward more selective access to capital, firmer negotiation dynamics, and wider variation in value outcomes across both residential and commercial sectors.
ross.turner@opteonsolutions.com
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This article is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice.
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