Australian property values have fallen for a seventh consecutive month, with new data from Cotality showing the housing downturn is gathering pace and raising the prospect of the largest decline in four decades.
Australian housing prices are falling at their fastest rate in 40 years, as rising mortgage costs, deteriorating affordability and weakening buyer confidence combine to reverse years of strong property market growth.
Property research firm Cotality’s latest Home Value Index, released on November 2, shows national dwelling values declined by 1.2 per cent in October, extending the downturn to seven consecutive months.
Since reaching their peak in March, Australian home values have fallen by 6.7 per cent, representing an estimated $63,400 reduction in the value of the median Australian dwelling.
The speed of the decline is particularly significant. Cotality’s research indicates the combined capital city housing index has fallen by 8.1 per cent over seven months, putting the current downturn on track to surpass previous major corrections.
The previous record decline across the combined capitals was 8.2 per cent during the 2017–19 downturn. The market is now approaching that threshold in considerably less time.
Cotality’s head of research, Gerard Burg, has warned that the housing market is experiencing an unusually sharp reversal, with further declines likely if interest rates remain elevated.
Brisbane and Perth lead the decline
The October figures reveal that the downturn is no longer concentrated in Sydney and Melbourne, traditionally the markets most closely associated with Australia’s housing affordability problems.
Brisbane recorded the steepest monthly decline among the major capitals, with dwelling values falling 2 per cent. Perth followed with a 1.7 per cent decline, while Sydney values dropped 1.6 per cent.
The results represent a significant change for Brisbane and Perth, which experienced substantial price appreciation during the preceding housing boom.
Although prices in both cities remain higher than they were a year ago, the recent acceleration in monthly declines suggests their periods of exceptional growth are coming to an end.
The broader geographical spread of the downturn is equally important. Falling values are increasingly evident across suburbs that had previously remained relatively resilient, indicating the weakness is becoming a national housing market phenomenon rather than an isolated correction in Australia’s most expensive cities.
Sydney faces its own challenges. The city’s housing values have fallen 4.7 per cent over the past three months, while Melbourne’s values remain 7.3 per cent below their level five years ago.
The figures demonstrate that the consequences of declining affordability and tighter credit conditions vary considerably between cities, depending on their previous price growth and underlying economic conditions.
Higher interest rates squeeze buyers
The principal driver of the downturn is weakening demand rather than a sudden increase in the number of properties being offered for sale.
Four interest rate increases this year have reduced borrowing capacity and increased mortgage repayments, placing additional pressure on households already struggling with the cost of living.
Cotality research director Tim Lawless said affordability and borrowing constraints had been weighing on demand even before interest rates began rising. Persistently weak consumer confidence and changes announced in the Federal Budget have added to the pressure.
The impact is visible in transaction volumes. Cotality estimates that home sales over the past three months were 23 per cent lower than a year earlier and 18 per cent below the previous five-year average.
Auction clearance rates across the combined capitals have consistently fallen below 50 per cent, while properties are taking longer to sell. The median time on market has increased to 39 days, and vendor discounting has reached its highest level since May 2019.
Although the flow of new listings remains almost 18 per cent below average, total advertised housing stock has risen to its highest level for this time of year since 2019. Buyers have more choice, but many remain reluctant or unable to commit.
Further falls expected into 2027
The immediate outlook for Australian housing remains uncertain, with the possibility of further interest rate increases complicating the recovery.
Cotality expects subdued conditions to continue through the remainder of 2026 and into 2027. The extent of further declines will depend on interest rates, employment conditions and whether buyer confidence improves.
For prospective purchasers, falling prices may eventually create opportunities. For existing homeowners, particularly those who bought recently or borrowed heavily, the adjustment could prove painful.
Australia’s persistent housing shortage provides some underlying support for property values. However, the latest figures demonstrate that limited supply cannot fully offset falling purchasing power.
The critical question is no longer whether Australia’s housing market is experiencing a correction, but how deep it will become before borrowing conditions and consumer confidence begin to improve. With the previous record downturn already within reach, the coming months will determine whether the current correction becomes the country’s most significant housing market decline in four decades.
