Australia home values near record fall as downturn deepens

Home values across Australia's combined capital cities fell for a seventh straight month in October, taking cumulative losses to 8.1%, Cotality said.

That leaves the market just 0.1 percentage points short of the largest peak-to-trough fall recorded across the combined capitals in at least 40 years: 8.2% between October 2017 and May 2019.

National dwelling values fell 3.9% over the quarter and 2.8% over the year to October 2026, while capital-city values fell 4.8% annually. Regional values rose 3.4% over the same period, pointing to a much milder downturn outside the main metropolitan markets.

Gerard Burg, Head of Research at Cotality, said the current cycle was likely to move beyond the previous record. "The largest peak-to-trough downturn across the combined capital cities over at least the past 40 years was 8.2% between October 2017 and May 2019. Next month, the current downturn looks set to surpass this fall," Burg said.

Two phases

The downturn began in Sydney and Melbourne, which peaked earlier than the other capitals. Melbourne values peaked in November 2025 and have since fallen 7.8%, while Sydney peaked in February 2026 and has recorded the deepest fall among the capitals, down 10.1% to the end of October.

Burg said Melbourne's pace of decline had eased compared with earlier cycles, while Sydney's had been slightly quicker than in the 2022-23 downturn. "Melbourne and Sydney led the early stages of the downturn, peaking in November 2025 and February 2026 respectively. Melbourne values have fallen 7.8% since their November peak, pulling back at a noticeably slower pace than during previous episodes such as the 2017-19 and 1989-92 cycles. Meanwhile, Sydney has recorded the largest drop, down 10.1% from its market peak to the end of October. In contrast to earlier cycles, Sydney's downturn is tracking marginally faster than the 2022-23 declines," Burg said.

The pattern has since shifted to the mid-sized capitals, where price falls have gathered pace. Perth has fallen 8.9% from its peak, Brisbane is down 8.3% and Adelaide has dropped 4.4%.

Those markets are now posting the fastest downturns on record for their cities. Cotality linked the shift to strong growth in home values after the pandemic, which stretched affordability and left buyers more exposed to higher borrowing costs.

"In cumulative terms, Perth has followed closely behind Sydney to record the country's second-largest decline to date, down 8.9% from its peak. Brisbane has also seen steep falls of 8.3%, while Adelaide is down 4.4%. These mid-sized capitals are now experiencing their fastest downturn on record. Strong growth in home values in these markets after COVID substantially stretched affordability metrics, increasing the demand-side pressures associated with rate hikes this year," Burg said.

Regional divide

Elsewhere, the picture has been less severe. Combined regional markets have fallen 3.1% from their peak, and downturns in Darwin and Hobart have yet to take clear shape.

Annual sales volumes fell 11.2% nationally, with weaker conditions in the combined capitals than in regional areas. Selling conditions also softened, with homes taking longer to sell and vendor discounting widening for an eighth consecutive month to 4.5%.

The median time on market rose to 41 days nationally over the three months to October. Auction conditions also weakened, with the four-week average clearance rate falling to its lowest level since May 2020.

Supply indicators point to a mixed market across the capitals. In the four weeks to 8 November, total stock for sale in Melbourne was 5.3% below the five-year average, compared with 25.1% above average in Adelaide, 24.4% above average in Brisbane and 8.0% above average in Perth.

Burg said that relative balance in Melbourne was helping to slow the pace of falls there. "A better balance between available supply and demand in Melbourne means home values in the city are falling at the slowest pace of the major capitals. A similar transition in other cities should eventually slow the declines elsewhere," Burg said.

Higher interest rates remain central to the downturn. The Reserve Bank raised the cash rate for the fifth time this year in November, lifting it by 25 basis points to 4.85%, while variable rates in September reached 6.22% for owner-occupiers and 6.41% for investors.

Even as values fell, rents continued to rise, though at a slower pace, with annual rental growth at 5.3% nationally. Gross rental yields rose to 3.9% as lower dwelling values combined with higher rents.

Australia's housing stock was valued at AUD $11.9 trillion, more than the country's superannuation and share markets combined, and represented 55.8% of household wealth, according to Cotality.

"A recovery in housing market conditions is unlikely until buyers have the confidence and financial capacity to return to the market. Affordability and investor policies are likely to remain constraints, meaning rate cuts from the Reserve Bank will probably be necessary, which currently appears unlikely before the second half of 2027," Burg said.