The monthly change in distressed listings was most pronounced in the Territories, with a 12.5% jump in the ACT and a 13.5% jump in the NT.
In terms of gross numbers, Queensland had the most at 2,791 and a jump of 7.5%, while New South Wales had 1,265, up 7.8%.
SQM managing director Louis Christopher said vendors struggled to move stock, which is at-odds with the notion of spring selling season.
"We note the new rise in distressed sales activity, which may indicate the rising interest rate environment is starting to bite," Mr Christopher said.
"Overall, it was a disappointing month for sellers and their respective agents in the capital cities."
There was a "modest" 1.6% rise in new listings (less than 30 days) across the capital cities over the month, while listings older than 180 days fell 0.9%.
"This is abnormal given October is a month where the annual spring selling season reaches a peak in activity. Older listings fell for the month driven by higher absorption rates in regional Australia," Mr Christopher said.
All cities recorded a rise in the number of older listings, but Adelaide bouyed the overall figure, with old listings declining 7%.
Over the past year, Hobart listings older than 180 days climbed 68.5% followed by Sydney at 20.2%.
Despite the slow turnover, asking prices for all dwellings climbed 0.6% nationally and 1.1% across the capital cities over the month.
The capital city average asking price for all dwellings during October was $997,344 - $1.21m for houses, and $608,270 for units.
"Sellers would be wise to meet the market in this environment if they want to sell," Mr Christopher said.
"I note our asking prices index was actually up a little, which is only going to hurt sellers in this current downturn."
Property confidence Low(e)
The weekly ANZ-Roy Morgan consumer confidence index showed confidence fell to lows not seen since April 2020, down to 79.9.
On Tuesday RBA Governor Dr Philip Lowe and Board members increased the cash rate by another 25 basis points, bringing it to a nine-year high of 2.85%.
This marks 275 basis points' worth of hikes since May.
In May the average owner occupier mortgage was $615,000.
A 25-year mortgage rate going from 2.50% p.a. to 5.25% p.a. would add $926 to monthly payments.
ANZ head of Australian economics David Plank said the consumer confidence index falling was largely led by concerns about mortgage payments and the cost of living.
"The share of people who think they are financially worse off than the same time last year has risen to 47%, the highest value for this indicator in over three decades," Mr Plank said.
"Cost of living concerns, along with expectations of more rate hikes by the RBA, have caused confidence to decline to levels last seen during the early weeks of the COVID lockdowns.
"This is also reflected in the 15.6% decline in confidence among people paying off their mortgages over the past six weeks."
ANZ economists expect the cash rate to peak at 3.85% by May 2023.
In a speech in Hobart on Tuesday night, Governor Lowe lamented the fact that inflation is still too high and that this will hurt consumers through higher cost of living, and higher mortgage payments before it's reined-in.
"I understand that the higher interest rates that are needed to bring inflation under control are unwelcome by many people, especially those who have borrowed large amounts over recent times," he said.
"At our meeting today we discussed the damage that high inflation does to people; it is a scourge.
"High inflation devalues your savings. It worsens inequality in our society and it undermines our living standards.
"We are conscious of this and are certainly taking it into account."
See Also: What is the gold standard?
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