RBA reportedly lifts rate to 4.85% and sees home building fall

The Reserve Bank of Australia has reportedly lifted the cash rate to 4.85 per cent at its Melbourne Cup Day meeting on 3 November, and its updated forecasts are reported to have home building shrinking through 2027 and 2028.

The rise itself was expected, and if confirmed it is the fifth of 2026 after the four delivered earlier in the year. What matters for builders, developers and suppliers is the reported forecast: the bank's own view that home building falls over the next two years, which is the window firms are setting pipelines and prices for now.

Check the RBA's post-meeting statement and Statement on Monetary Policy for the size and timing of any forecast fall before changing plans.

Buyers lose more borrowing power with a fifth rate rise

Before the decision, realestate.com.au senior economist Eleanor Creagh said the housing market was already absorbing the four increases delivered earlier in the year and that a fifth would cut purchasing power further.

“Higher rates reduce how much prospective buyers can borrow and increase mortgage repayments and can make households just generally more cautious about taking on debt,” she said.

She pointed to softer auction clearance rates, homes taking longer to sell, and year-to-date sales volumes well below 2025. She expects another rise to push prices down further over the next few months, with the sharpest falls likely where affordability has worsened most.

Favour units and cheaper product as Geelong house values fall

The October reading of the realestate.com.au Home Value Index was the seventh straight monthly fall nationally, and Creagh says the downturn is now spreading across the mainland capitals as higher prices and reduced borrowing capacity bite. Melbourne is the only capital where values sit below their level of five years ago; it slipped 0.1 per cent in October.

Geelong shows what a regional market looks like after four rises. The city's median house value fell to $799,000 in October, down $12,000 or 1.51 per cent on a year earlier. Units held up better: the $577,000 median unit value is $5,000 (0.92 per cent) lower than a year ago but rose slightly for the month.

Creagh's explanation is that buyers whose borrowing capacity has been cut move down the price curve and trade off property type or location, which spreads demand across cheaper product. For anyone sizing new product, that favours more affordable stock while borrowing capacity keeps falling.

ABS new dwelling prices flat in September

ABS figures for September show new dwelling prices unchanged for the month and annual new dwelling inflation easing to 4.7 per cent, from 5.4 per cent in August.

The average hides a split. One part of the market is still putting base prices up, and another part is offering discounts to hold sales. A higher cash rate, and the cut to buyer borrowing capacity that comes with it, pushes more firms into the second group.

For anyone quoting fixed-price contracts, flat new home prices mean there is no longer an inflation tailwind to absorb cost growth between signing and completion.

Update plumbing and electrical allowances as copper pipe jumps 37.6%

Separate ABS figures show copper pipe up 37.6 per cent in a year, with copper pipe, electrical cable and plastic pipe up between 23 and 38 per cent. Services materials are climbing much faster than the structural materials, so the plumbing and electrical rough-in has become the main driver of house material cost growth.

Put the two ABS series together and the margin picture is clear: selling prices flat, discounting spreading, and copper pipe, electrical cable and plastic pipe up 23 to 38 per cent, all before a rate rise the central bank reportedly expects to reduce the volume of work.

Feasibilities for 2027 should assume falling volumes

The forward pipeline was thin before the RBA moved, as the September apartment approvals lift showed, and the reported forecast says it gets thinner. The practical response is to rerun the next two years against the RBA's direction rather than a flat-activity base case.

• Forward work: map signed contracts, presales and conditional deals against planned 2027 and 2028 starts, and identify which jobs fall over if buyer finance tightens again.
• Cash flow and debt: model construction and land facilities at a 4.85 per cent cash rate, and check covenant headroom on projects with long presale periods.
• Pricing: consider whether your business is a base-price lifter or a discounter. Both strategies are in use in the market, and the gap between them will widen as volume falls.
• Cost allowances: reprice plumbing and electrical rough-in on current copper, cable and plastic pipe prices, and shorten the validity of quotes that rely on them.
• Product mix: more affordable regions and property types are holding value better as borrowing capacity falls, which favours more affordable product in new feasibilities.
• Suppliers: forward orders from builders are the first thing cut when home building falls, so review credit terms and exposure to firms with thin 2027 order books.

This is general information, not financial advice. Talk to your lender, accountant or financial adviser about how the rate rise affects your facilities and projects.

Start with the RBA's statement to confirm the forecast path, then run every 2027 feasibility and cash flow against it before committing to new land, new staff or new stock.