Australia’s economic and property market faces mixed signals in June update
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Photo by Curtis Adams
Australia’s economic landscape is showing signs of strain, as evidenced by recent data from the March 2026 quarter, highlighted in the June 2026 edition of the Month In Review, a national property report from Herron Todd White – Australia’s largest property valuation and advisory firm. The National Accounts reveal a subdued quarterly growth of 0.3 per cent, a significant deceleration from the 0.9 per cent recorded in the previous quarter. This brings annual growth to 2.5 per cent, positioning Australia favourably compared to many advanced economies, though still trailing behind the United States and significantly lower than China. On a per capita basis, the scenario appears bleaker, with a contraction of 0.1 per cent over the quarter and a modest 1.0 per cent increase over the year.
The sluggish growth is attributed to waning consumer and business confidence, compounded by two cash rate hikes during the quarter, with another increase following soon after. As the unemployment rate edges upward, currently at 4.4 per cent from 4.5 per cent last month, it remains higher than the 4.1 per cent recorded a year ago. “With economic growth slowing and inflation remaining elevated, I wouldn’t be surprised if [the unemployment rate] continues to drift higher over the coming months,” noted a leading economist.
Inflation continues to be a pressing concern, with headline inflation up by 4.0 per cent over the year to May 2026, a slight decrease from 4.2 per cent in April. Despite this, the Reserve Bank of Australia’s (RBA) preferred measure of underlying inflation is on the rise, reaching 3.6 per cent over the year, the highest since September 2024. This remains well above the RBA’s target inflation rate of 2.5 per cent. The RBA’s decision to hold interest rates steady in June, after three consecutive 25 basis point hikes, underscores the delicate balance between managing inflation and supporting economic growth. “Inflationary pressures remain, and whilst expectations of further interest rate increases have faded, there remains a risk interest rates could rise further,” the RBA stated.
The federal budget’s alterations to negative gearing and the capital gains tax discount are further dampening consumer and business sentiment. Current sentiment levels sit well below long-term averages, highlighting a growing pessimism that is impacting not just residential property markets but also retail and office sectors.
In the housing market, the confluence of high inflation, increased interest rates, and weakening economic growth is beginning to take its toll. According to property analyst Cotality, national dwelling values remained unchanged in May 2026, marking the first stagnation since January 2025. However, the picture is mixed across the country. Combined capital city dwelling values fell by 0.1 per cent, while regional market values saw a rise of 0.6 per cent. “While some capital cities have seen values decline over recent months, values continue to rise elsewhere, with Perth and regional Western Australia showing no signs of slowing,” observed a market analyst.
The lower end of the market, buoyed by investor and first home buyer activity, continues to see value increases. Conversely, the higher end, which is more susceptible to borrowing capacity reductions, is experiencing declines. The volume of properties available for sale is another factor influencing the market. May 2026 saw 77,270 newly listed properties, a 5 per cent increase over the month and 12 per cent over the year, according to SQM Research. The total number of properties on the market rose by 10.4 per cent over the month, reaching 258,803. “High stock levels and low consumer confidence are contributing to the value declines being recorded in Sydney, Melbourne and Canberra,” a real estate expert explained.
In contrast, the rental market is experiencing a different trend. Despite slowing housing value growth, rental prices continue to climb, driven by high population growth and limited housing supply. Cotality reports a 5.9 per cent increase in rents over the past year, with regional Tasmania, Darwin, regional Western Australia, and Hobart leading the charge. Rental vacancy rates, historically around 2 per cent or higher, have dropped to 1.5 per cent, with Brisbane, Adelaide, Perth, Hobart, and Canberra experiencing sub-1 per cent rates.
The Herron Todd White Month in Review offers valuable insights into these trends, providing on-the-ground perspectives from the nation’s largest team of valuers. As conditions are expected to slow further in the coming months, this resource remains crucial for understanding the evolving market dynamics.