The Reserve Bank of Australia faces a critical moment this week. When the board meets on March 17, it will almost certainly hold the cash rate steady at 3.85 per cent, the level set in February after its first rate hike since November 2023. But the signal it sends about future moves will matter far more than the March decision itself.
The real test comes in May. If trimmed mean inflation remains above 3 per cent—which most forecasters expect—the RBA is virtually certain to hike another 25 basis points to 4.10 per cent. For the median Australian mortgage of around $600,000, that cumulative increase means roughly $200 extra per month, or $2,400 per year. For a median household already stretched, that's a substantial hit.
The early market signals suggest households are already bracing for pain. National weekend auction clearance rates fell to 64.3 per cent in the week ending March 8, down from 65.7 per cent the week prior. More concerning, Sydney and Melbourne reported just 52 per cent and 55 per cent respectively, reflecting buyer caution in the nation's two largest housing markets.
The reasons are clear. Australian housing affordability has collapsed. Median house prices now exceed $1 million nationally, while the latest ABS data shows annual housing inflation at 6.8 per cent. More painfully, an estimated 1.26 million low-income households now spend more than 30 per cent of disposable income on housing. It takes an average Australian a decade to save enough for a house deposit.
ANZ's forecast of 4.8 per cent house price growth for 2026, down sharply from 7.3 per cent in 2025, assumes the market can absorb further rate rises without buckling. That's an optimistic bet. When buyers are already selective and sellers are increasingly moving to private treaty negotiations, the auction clearance rate becomes less a curiosity and more a window into genuine demand destruction.
The RBA's March message will set the tone. But the May decision will determine whether 2026 becomes the year the Australian property market finally feels the full weight of its own economics.