The market is slowing. That is not the same as the market falling — and the sellers who confuse the two make different, worse decisions than the ones who don't.

What the numbers actually show

House prices grew 5.2% year-on-year in June, down from 5.7% in May. Across the last quarter, growth was 5.6%, down from 6.0% the quarter before. Prices are still rising faster than the cost of living, which sits at 5.0% — but the gap is closing.

Rentals are moving the other direction. Rental growth is now 4.1% year-on-year and still climbing, with some areas seeing sharper increases than others.

Why prices are slowing

The mechanism is affordability. Home loans are more expensive than they were three years ago. Consumer confidence is softer. The broader economy is under pressure. All of that removes buyers from the market, which slows price growth mechanically.

Why prices aren't falling

Because supply is even more constrained than demand. New residential construction has slowed significantly, and existing homeowners are choosing to hold rather than list. When there are fewer buyers and fewer homes, prices don't collapse — they plateau.

The same supply constraint is what's keeping rentals firm. Buyers who can't stretch to a purchase move to rentals instead, and there aren't enough new rental units being built to keep pace with demand.

What to expect for the rest of 2026

Price growth is likely to settle around 4% by year-end. High borrowing costs and a weak economy will keep demand suppressed. But the housing shortage will keep prices from falling.

Expect fewer transactions, not lower prices.

The Reserve Bank's decision to hold rates steady gives current homeowners and prospective buyers some breathing room. Further out, once inflation peaks — expected in early 2027 — the door opens for interest rate cuts, which would materially improve buyer affordability.

Rentals will stay firm. Buyers priced out of ownership continue to rent, and new rental supply isn't catching up. That said, empty rental units are still higher than pre-pandemic levels — meaning rentals can only rise so far before tenants push back.

What this means for you

If you're selling: A slowing market is unforgiving of aspirational pricing. Homes priced at last year's ceiling sit. Homes priced to the current market move. The difference between a fast sale and a stalled listing is now measured in weeks, not months. Your first two weeks on market define your final selling price more than they used to.

If you're buying: You have marginally more room to negotiate than you did twelve months ago, but not much. Sellers of well-presented homes in supply-short areas still hold pricing power. Waiting for a large drop that isn't coming is a common mistake — waiting for the possible rate cut that's expected in 2027 might be sensible for a buyer at the margin of affordability, but not for one who's ready now.

If you're renting: Expect steady, not sharp, increases. If ownership was previously stretched, the rate hold gives you time to plan a route in — but don't wait indefinitely for a market correction that isn't materialising.

The bottom line

A slowing market rewards owners who understand their real number. It punishes those who are still pricing to last year's peak.

The valuation that matters isn't what your home was worth two years ago. It's what it's worth this month.