Kaylee Cranley
Updated 1 Jun 2026, 5:05am
First published 1 Jun 2026, 5:00am
Sydney’s home price downswing deepened in May, as recent rate rises squeezed borrowing power while property tax changes also unnerved buyers.
The latest PropTrack Home Price Index has spotlighted Sydney home prices have fallen by two per cent in May, a -1.2 per cent decrease from the peak in late February.
The data follows three interest rate hikes this year, revealing the third consecutive month of price falls for Sydney, with the chance further potential rate rises this year could continue to weigh on prices.
It follows recent data that spotlighted some inner-city, up-market and waterside locations in Sydney are showing significant decline, with prices in some suburbs dropping by nearly 30 per cent annually.
REA Group Senior Economist Angus Moore said although the May drop was not “huge” given how expensive Sydney property prices are this percentage translates into quite large numbers. He also pointed to the economic headwinds contributing to the fall.
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New data has revealed Sydney house prices saw a 2 per cent decline in May
“The declines to date have been relatively modest and largely tracking with Melbourne,” Mr Moore said.
“I think that’s really down to the fact that rates have risen three times and are expected to go up at least once more this year.
“That’s weighing on borrowing capacity, weighing on willingness to pay, and flowing through into home prices.
“Sydney has also seen a bit softer auction conditions this year – clearance rates have slipped below 50 per cent over the last month or two, which is probably weighing on home prices as well.”
Mr Moore said rate increases could weigh more heavily on Sydney than on some other parts of the country.
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Angus Moore
“We tend to see those more expensive segments be more interest rate sensitive,” he said.
“That said, the cumulative rate increases we’ve seen is still smaller than what we saw in 2022 and 2023 by a long way, so we wouldn’t expect to see a large correction here.
“But certainly soft through the rest of this year.”
The data revealed Sydney’s house median is now $1,604,000, despite price falls it signals the market is still expensive and very challenging for affordability.
“That’s not unique to New South Wales – housing affordability is challenging everywhere – but New South Wales is the least affordable,” Mr Moore said.
“Part of why Sydney is so expensive is it is a large and high-income city, but that doesn’t change the challenge of affordability that the city faces.
“It really underscores the importance of building more homes to accommodate the people that want to live here and help make housing more affordable.”
The data revealed a monthly decline in unit prices to be -0.4 per cent
The data also revealed a monthly decline in unit prices of -0.4 per cent with a median unit price in Sydney now sitting at $884,000.
Mr Moore said units certainly represent a more affordable entry point in Sydney, and in other parts of Australia as well.
“That’s not a new feature by any means – that’s always been true in Sydney and more broadly,” he said.
“But with rising interest rates, I think that does encourage some buyers to look at those more affordable options, because those affordability constraints make those more expensive things like detached homes that much harder.”
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