The Australian property market is showing clear signs of cooling, with a significant uptick in homes being passed in at auction. This trend, driven by a combination of rising interest rates and a growing inventory of properties, signals a shift away from the seller-dominated market seen in recent years. National auction clearance rates have dipped to their lowest point this year, reflecting a broader decline in buyer confidence and affordability.
Auction Clearance Rates Plummet
Last week, the national auction clearance rate hovered just under 57%, a figure that hasn’t been this low since the start of the year. Sydney, a notoriously competitive market, fared even worse, with its clearance rate falling to 55%. These figures represent not only properties that failed to sell under the hammer but also those withdrawn from auction before bidding commenced.
The sustained period of strong auction clearance rates, often sitting at or above 66% from mid-2025 until January (barring the usual end-of-year lull), has been a hallmark of a seller’s market. A clearance rate closer to 70% typically indicates that sellers hold the upper hand. However, the recent sharp decline, particularly between January and March, marks the most substantial slide in auction clearance rates seen since the onset of the pandemic.
Buyer Confidence Erodes Amidst Economic Headwinds
Industry experts attribute this downturn to a confluence of factors impacting buyer sentiment. Luke Bindley, director at Austin Buyers Agents in Sydney, points to the recent interest rate hikes and the ripple effects of global conflicts, such as the war in Iran, as primary drivers of increased living costs and reduced purchasing power.
“A lot of auctions are passing in or not even making it to auction day,” Bindley observed. “I don’t think it’s even worth taking your property to auction, unless it’s really special, at this point in time.” He notes that while outer suburban areas in Sydney remain somewhat resilient, the inner city has decidedly transitioned into a buyer’s market.
The Impact of Interest Rate Hikes on Affordability
The consecutive increases in interest rates have directly impacted the ability of prospective buyers to secure new loans. According to Canstar, the typical mortgage rate has climbed to approximately 6%, up from around 5.5% at the beginning of the year. This increase means an individual earning $107,000 can now borrow roughly $535,000, a reduction of about $25,000 compared to what they could have borrowed in January.
The consequences for first-home buyers have been particularly stark. Loan Market data indicates a significant quarter-on-quarter drop in first-home buyer activity, with numbers falling by 25% between early February and early March, coinciding with the initial rate hike.
Justin Hewitt, a mortgage broker with Loan Market, has observed this trend firsthand, noting that even in traditionally more affordable and competitive areas like Brisbane’s western corridor, first-time buyers are stepping back. “In the last two or three months, there’s a bit of a market slowdown, and [I’m] seeing a little bit more of investors and upgraders,” Hewitt said. He revealed that while first-home buyers constituted about two-thirds of his clientele in late 2025, they now represent just over one-third of his customer base.
A Growing Supply of Homes for Sale
This cooling demand has coincided with a surge in the number of properties coming onto the market. The week of March 23rd was projected to see 4,163 homes go to auction nationwide, marking the highest volume of auctions since December 2021.
Sellers Cashing In Amidst Market Peaks
The preceding period of robust house price growth in 2025 has presented a lucrative opportunity for many homeowners and investors to cash out. Data from Cotality reveals that the average profit for property resellers reached a record $365,000 in December. Impressively, over 95% of those who sold their properties in the final quarter of 2025 did so at a profit.
While home prices in most capital cities were still reaching new highs, Melbourne experienced a dip, and Sydney’s prices remained stagnant over the preceding three months, according to daily Cotality data. This environment has encouraged many homeowners and investors to offload their assets and realise their gains.
Future Concerns: Rising Rates and Potential Forced Sales
The Reserve Bank of Australia (RBA) has issued warnings that further interest rate hikes could compel more homeowners to sell. The RBA’s latest financial stability review highlighted that the proportion of mortgaged owner-occupiers spending more than they earn has fallen significantly from around 4.5% in 2023 to approximately 1.3% currently, largely due to easing inflation and interest rates.
However, the review projects a concerning future. It forecasts that a resurgence in interest rates, coupled with a potential rise in unemployment, could push this figure above 1.6% by the end of 2026. This scenario could force some households into making the “difficult and disruptive” decision to sell their homes to manage their finances.
The outlook from major banks suggests the RBA is likely to implement at least one more interest rate hike at its May meeting, with financial markets pricing in further increases by November. This continued tightening of monetary policy is expected to further influence the property market dynamics.
