Sydney's housing market slides 7.9% as price drops threaten supply goals

Since reaching a record $1.8 million in December 2025, Sydney's median house price has slipped to $1.66 million, a 7.9% decline that Domain says is the sharpest among capital cities this year. The downturn accelerated after the Reserve Bank implemented four interest-rate hikes, tightening mortgage conditions for prospective buyers. Although lower prices may ease entry for some first-home seekers, the accompanying rise in borrowing costs has worsened affordability metrics, according to the Housing Industry Association and realestate.com.au.

Economists caution that the price slump could delay construction, threatening the NSW government's ambition to deliver 377,000 new homes by 2029. KPMG urban economist Terry Rawnsley predicts a 6-12 month lag before developers pause projects, while Peter Tulip notes that higher construction costs and land prices have already eroded profit margins. Nonetheless, recent planning reforms and a surge in development applications suggest some resilience in the market.