What did Cotality's May 2026 Home Value Index show?

The national index was flat at 0.0% for the month, the weakest reading of the current cycle. Sydney fell 0.9% and Melbourne 0.8%, putting both cities about six months into a run of consecutive monthly declines. Sydney sits roughly 2.1% below its November 2025 peak and Melbourne 2.9% below the same prior high. Perth and Darwin led the gainers at around 1.5% for the month. Brisbane lifted 1.0%, Adelaide 0.5%. The 12-month spread between Perth (+20% range) and Melbourne (low single digits) sits at about 24 percentage points, the widest in the index's modern history.

What is happening to rents and yields if values are falling?

On Cotality's combined capitals measure, annual rent growth has reaccelerated to 5.7% after dipping to 3.4% over the 12 months to June 2025. Because rents are rising while values softened, gross rental yields are expanding nationally for the first time in the cycle, with the national gross yield rising to about 3.59% in April 2026 from a recent low of 3.55% in December 2025 and January 2026. For an investor buying today, the cash flow read is improving even as capital gains on the headline index pause.

Did the RBA cut rates in June 2026?

No. The Monetary Policy Board left the cash rate target unchanged at 4.35% at the June 2026 meeting. That followed three 25 basis point hikes earlier in the year, in February, March and May. CBA and ANZ expect the next move to be a cut, but not until 2027. NAB now expects the first cut in the June quarter of 2027. Westpac remains the outlier, still pencilling in two further hikes to 4.85% by September 2026. For a leveraged investor, the working assumption for the next three to six months is rates held at 4.35%, with directional risk skewed to no change.

Has investor lending peaked?

On the most recent ABS Lending Indicators, the number of new investor loan commitments for dwellings fell 5.3% in the March quarter 2026 and the value fell 3.0%. Owner-occupier volumes fell 6.9%, first home buyer volumes fell 4.3%. Total new dwelling loan commitments dropped 6.2% by number and 3.8% by value for the quarter. The release captured the impact of the February and March cash rate hikes plus APRA's debt-to-income cap that activated on 1 February 2026. Investor lending has plainly rolled over from the late 2025 peak.

Is now the time to buy in Sydney or Melbourne if prices are falling?

The Cotality data says the two largest markets are still in the early phases of the decline, with listings picking up and demand softening on Tim Lawless's read. A buyer who is content to wait for evidence of a clear trough is not pricing risk by sitting on hands for another two to three months of data. A buyer who has identified a specific asset at a specific price that yields above their cost of debt and that does not need the index to recover to make sense, can transact. The general lesson from cycles past is that picking the exact bottom is luck. Picking an asset that works at today's rents and rates is the reliable strategy.

How does the capital city divergence change my acquisition strategy?

Perth and Darwin are late-cycle markets with strong run rates and yields that have already compressed. Brisbane and Adelaide retain forward momentum on the index but at decelerating rates. Sydney and Melbourne are early in their next leg down on the index. The capital allocation question is not 'which market is strongest today' but 'where is the spread between rental income and cost of debt at the strongest entry point on a five-year hold.' A 4.35% mortgage with a 3.5% gross yield is a meaningfully different proposition to a 4.35% mortgage with a 4.5% gross yield. Property-by-property maths beats the city-level narrative.

Sydney fell 0.9% and Melbourne 0.8% in May. Perth is still up 20% on the year

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

Key takeaways

Cotality's May 2026 Home Value Index was flat at 0.0% nationally for the month, the weakest reading of the current cycle. Sydney fell 0.9% and Melbourne 0.8%, both extending consecutive monthly declines that began late in 2025.
Sydney's median dwelling value sits at about $1.28 million and is now around 2.1% below its November 2025 peak. Melbourne is about 2.9% below its same prior high. Perth and Darwin led the gainers at around 1.5% for May, with Brisbane up 1.0% and Adelaide up 0.5%.
The 12-month spread between the fastest and slowest capital is now 24 percentage points, with Perth annual growth in the 20% range and Melbourne in low single digits. On Cotality research director Tim Lawless's commentary, that gap is the widest in the publication's modern dataset.
Annual rent growth is back at 5.7% across the combined capitals on Cotality's tracking. Because rents are still rising while values softened, gross rental yields are expanding nationally for the first time in this cycle, with the national yield lifting to about 3.59% in April 2026.
The RBA Monetary Policy Board left the cash rate target unchanged at 4.35% at the June 2026 meeting, after three 25 basis point hikes earlier in the year. CBA and ANZ both expect the next move to be a cut, with NAB now tipping the first cut for the June quarter of 2027. Westpac is the outlier, still pencilling in two further hikes to 4.85% by September 2026.
New investor loan commitments fell 5.3% by number and 3.0% by value in the March quarter 2026 on the latest ABS Lending Indicators release. Owner-occupier volumes fell 6.9%, first home buyer volumes fell 4.3%. Total new dwelling loan commitments dropped 6.2% by number.
SQM Research had the national residential vacancy rate steady at 1.2% in May 2026, with total vacant rental dwellings rising from 35,258 to 37,844 over the month. All capital cities remain below 2%.
The 1 July 2026 reset point lines up with insurance renewals, land tax assessments and the next financial year of negative gearing. For a Sydney or Melbourne investor sitting on a 2025 purchase, the equity position is on the back foot but the rent and yield trajectory remains supportive.

This article is general information only and does not constitute financial, tax, or investment advice.

The Cotality monthly Home Value Index for May 2026 landed at the start of June and the headline is the cleanest expression of where the cycle has rolled to. The national index was flat. Sydney fell 0.9%. Melbourne fell 0.8%. Perth and Darwin still ran at 1.5% for the month. The 24 percentage point gap between the fastest and slowest capital on the 12-month measure is, on Cotality's framing, the widest spread in the publication's modern history.

For a leveraged residential landlord, that is the cycle picture that matters. The cash rate sits at 4.35% after the RBA's 17 June 2026 hold. Rents are still climbing. Yields are expanding for the first time this cycle. Listings are rebuilding. Investor lending has rolled. Here is how those moving parts read for an investor's cash flow, equity and acquisition strategy through the back half of 2026.

What the May print actually said

The national Home Value Index printed 0.0% for May 2026. That is the weakest monthly read of the 2025-26 upswing and is what Cotality is now describing as the cycle starting to flatten.

The composition tells you why.

Sydney: down 0.9% for the month. Now about 2.1% below the November 2025 cyclical high. Median dwelling value sits at roughly $1.28 million.
Melbourne: down 0.8% for the month. About 2.9% below the November 2025 high. Annual growth back into low single digits.
Perth: up about 1.5% for the month. Annual growth still in the 20% range, with the 12-month read above any other capital.
Darwin: matched Perth at about 1.5% for the month. Annual growth at the 20% mark.
Brisbane: up 1.0% for the month. Annual growth still around the 19% mark.
Adelaide: up 0.5% for the month. Annual growth around 12%.
Hobart: annual growth around 9%, monthly print modest.
Canberra: annual growth around 5-6%, monthly print modest.

The 24 percentage point spread between Perth's annual growth and Melbourne's annual growth is the bit Cotality flagged as a record. It captures a market that has fully divorced from a single national narrative. Perth and Darwin are running on the back of a multi-year resources and migration tailwind plus tight supply. Brisbane and Adelaide are running on relative affordability and population momentum. Sydney and Melbourne are running into the wall of borrowing capacity at 4.35% cash rates.

On Cotality research director Tim Lawless's public commentary, Sydney and Melbourne are now around six months into the early phases of decline, while growth is slowing across the mid-sized capitals. Listings are picking up as demand softens. Affordability and serviceability pressures are biting.

The rent and yield picture is the offset

The bit that does not get the same headline treatment is the rental side.

Annual rent growth on Cotality's combined capitals measure has reaccelerated to 5.7% in the year to April 2026. That is up from 3.4% in the 12 months to June 2025. For an investor, that is roughly $60 per week extra on a $1,100 per week Sydney house and roughly $33 per week extra on a $620 per week Adelaide unit, compared to a year ago.

Because rents are rising while values softened, gross rental yields are expanding nationally for the first time in this cycle. The national gross yield lifted to about 3.59% in April 2026 from a recent low of 3.55% in December 2025 and January 2026. That is a small absolute move. The direction is the news.

For a landlord refinancing into the back half of 2026, that yield expansion is the lever that softens the impact of a sticky 4.35% cash rate. On a $700,000 investor mortgage at the major bank standard variable, a 25 basis point pickup in gross yield on a $1.0 million property is roughly $2,500 a year of extra rent, before tax. Net of marginal tax at 37%, that is around $1,575 in pocket.

It does not replace capital growth as the long-run wealth story. It does materially improve the holding economics for a tenant-occupied asset.

The RBA, the banks and the borrowing capacity picture

The Monetary Policy Board left the cash rate target unchanged at 4.35% at the 17 June 2026 meeting, after three 25 basis point hikes earlier in the year, in February, March and May. The April Monthly CPI Indicator printed at 4.2%, down from 4.6% in the year to March 2026, with the trimmed mean at 3.4%. Housing was the largest contributor to annual inflation at 6.3%, with electricity 22.5% higher than a year earlier as state and federal rebates rolled off.

The big four economics teams are now spread across the next move.

NAB has called the peak and now tips three 25 basis point cuts in June, September and December of 2027, taking the cash rate to 3.60% by the end of next year.
CBA sees 25 basis point cuts in May and August of 2027, taking the cash rate to 3.85% by Q3 next year.
ANZ sees 25 basis point cuts in September and December of 2027, taking the cash rate to 3.85% by year end.
Westpac remains the outlier, still pencilling in two further 25 basis point hikes to 4.85% by September 2026.

For a leveraged investor, the working planning assumption for the next three to six months is rates held at 4.35%, with the directional risk skewed to no change rather than a cut. Westpac's hawkish call is a real outlier. CBA and ANZ are essentially pricing a long hold then a slow easing cycle.

The lending capacity picture confirms the burn rate. On the most recent ABS Lending Indicators for the March quarter 2026, the number of new investor loan commitments fell 5.3% over the quarter and the value fell 3.0%. Owner-occupier volumes fell 6.9%. First home buyer volumes fell 4.3%. The total new dwelling loan commitment count dropped 6.2% for the quarter and the value fell 3.8%.

That release captured the impact of the February (3.85%) and March (4.10%) hikes plus APRA's debt-to-income cap that activated on 1 February 2026. The May (4.35%) hike will land in the June quarter data, which means the lending pullback is more likely to deepen than to reverse in the next print.

The implication for a Sydney or Melbourne landlord

A Sydney or Melbourne landlord who bought in 2025 and is sitting on a high loan-to-value position is now experiencing the cycle in two parts. The equity position has eased back by roughly 2-3% from peak. The rent line is up. The 4.35% mortgage is unchanged for now.

The first-order question is whether the position is cash-flow viable on today's rent against today's mortgage. The Cotality rent reacceleration helps. The flat capital growth does not change the cash flow line.

The second-order question is whether the position is mark-to-market viable on today's bank valuation. A landlord who borrowed at 90% LVR against a peak November 2025 valuation and now needs to refinance against an early-2026 valuation may be inside lender mortgage insurance territory again. That is a refinance cost, not a forced sale trigger, but it does change the menu of available lenders and the all-in interest rate.

For a Brisbane, Adelaide or Perth landlord, the same two questions look different. The equity position is still building. The rent line is still rising. The 4.35% mortgage on a higher gross yield asset is materially more comfortable.

The 1 July 2026 reset

The cycle turn lands two weeks before the standard 1 July reset of insurance renewals, land tax assessments and the next financial year of negative gearing claims. For an investor on the cusp of refinancing or buying, the practical implications are:

Refinance window. A flat to softer market makes lender valuations more conservative. Order the upfront valuation before applying. If the new valuation is below the purchase value, the refinance LVR is wider. Plan for that before signing the discharge.
Insurance renewal. The average home premium was $2,938 by late 2025 on the Actuaries Institute affordability tracker. 2026 quotes have spanned single-digit increases through 40%-plus on individual policies. Get three quotes. The premium is a fully deductible rental expense in the year incurred.
Land tax. NSW, VIC, QLD and SA have all reset assessments for the 2026 year. Sydney and Melbourne softer values on the index do not directly flow into the next assessment because state revenue offices use their own land value methodology with a lag.
End-of-year deduction sweep. Repairs versus capital, prepaid interest, prepaid insurance and depreciation schedules all sit in the four-week window to 30 June. Book them now if cash flow allows.

The cycle picture is interesting. The cash flow picture is doable. The action items are concrete.

The bottom line

Cotality's May print is the clearest read in months that the 2025-26 upswing has rolled over at the top of the index. Sydney and Melbourne are leading the way down. Perth and Darwin are still running hot. Brisbane and Adelaide are decelerating from a strong base.

The 24 percentage point spread between the fastest and slowest capital is the widest on record. Single-city narratives no longer describe the national market. A landlord who runs a single national assumption on capital growth, rent growth or vacancy is going to be wrong on at least two out of three measures, depending on the asset.

The rent and yield picture is the offset. 5.7% annual rent growth and yield expansion to 3.59% is a real cash flow positive. The cash rate at 4.35% with no near-term cut on the major bank consensus means the mortgage line is steady through year end. The 1 July renewal window is the right moment to lock in those moving parts on a single property file.

Propkt is the spreadsheet that does that work. The mortgage calculator stress-tests a 4.35% loan against the Westpac 4.85% scenario in one click. The expense tracker tags repairs against capital so the end-of-year split is clean. The rent management tool catches a late payment before it eats into the cash flow buffer that May's index now demands.

Run the numbers on your own property today. The cycle has turned. The cash flow does not have to.