Australia housing market stalls as spring sales slide

Australia's spring housing market has stalled, with home sales falling and selling times lengthening, according to Cotality. Its latest housing data showed September sales were down 20.9% from a year earlier.

An estimated 39,747 homes were sold nationally in September, while the median time to sell rose to 41 days from 26 days a year earlier. Capital city vendors also accepted their largest discounts in five years, with discounting reaching 4.4%.

The figures point to a market where supply is building faster than demand. New listings fell 7.9% from a year earlier and were almost 12% below the five-year average, yet total advertised stock rose 19.1% to 145,573 properties.

The shift has emerged during what is usually one of the busiest periods for the housing market. Instead of a spring lift in turnover, homes are staying on the market longer and auction results have weakened, with the four-week average clearance rate falling to 48.3% from 64.4% in late February.

Tim Lawless, Research Director at Cotality, linked the slowdown to higher borrowing costs and weak household sentiment.

“School holidays and football finals can disrupt the market during September, but they don't explain the extent of the slowdown we're seeing in sales activity or why homes are taking so much longer to sell,” Lawless said.

“The bigger issue is that buyers are finding it harder to commit. Higher interest rates have reduced borrowing capacity, household budgets are under pressure and confidence is weak. Even people who are in a position to buy may be reluctant to make a decision while values are falling.”

National dwelling values fell 3.7% over the September quarter. Across the combined capitals, values dropped 4.3% over the quarter and were down 1.8% over the year, while regional values fell 1.9% over the quarter but remained 5.6% higher than a year earlier.

Borrowing pressure

The latest Reserve Bank rate increase, the fourth this year, has further reduced borrowing capacity and increased mortgage repayments, Cotality said. The group estimated that cumulative rate rises since February had cut the borrowing capacity of a median-income household by about $90,000, or 9%.

That has fed through to weaker selling conditions in major cities. Across the combined capitals, the median selling time reached 39 days, up from 23 days a year earlier, marking the longest selling period in five years.

Lawless said buyers were balancing several pressures at once.

“Buyers aren't just dealing with reduced borrowing power. They're also weighing up higher repayments and the prospect of further price falls, which is making some reluctant to commit even if they can afford to buy,” he said.

City divergence

Some of the sharpest changes were recorded in Brisbane and Perth, two markets that had previously been supported by strong price growth and limited supply. In Brisbane, total advertised listings rose 60.4% over the past year and median selling times increased from 17 to 38 days. In Perth, listings climbed 64.7% and selling times rose from 11 to 26 days.

Dwelling values in both cities fell 4.7% over the September quarter. Even so, annual growth remained positive at 5.9% in Brisbane and 10.1% in Perth because of gains earlier in the year.

Sydney recorded the largest quarterly decline among the capitals, with dwelling values down 4.9%, leaving prices 8.6% below their February peak. Melbourne values fell 3.4% over the quarter, while Darwin was the only capital to post growth, edging up 0.5%.

“Brisbane and Perth have gone from markets where buyers had very little choice and properties were selling quickly, to conditions where listings are rising and, with less competition, buyers have more time to make a decision,” Lawless said.

“Annual price growth is still positive in both cities, but that reflects stronger conditions from the first half of the year. The more recent figures show a market that's become much more challenging for vendors, particularly those expecting to achieve the prices they might have secured six or 12 months ago.”

Regional resilience

Regional markets have held up better than the capitals on both prices and sales. Regional sales activity fell 1.6% over the year, compared with a 9.1% decline across the combined capitals.

Lawless said lower price points in regional Australia had made those markets less exposed to the affordability squeeze seen in larger cities.

“Property values are typically lower across regional Australia, which gives buyers more options within their budgets. That doesn't make regional markets immune to higher interest rates, but it helps explain why sales activity and values have held up better than in the capitals,” he said.

Rental growth has also eased. National rents rose 0.5% over the September quarter, the slowest quarterly growth since December 2024, while annual rental growth slowed to 5.5%. Gross rental yields increased to 3.85%, the highest level since August 2019, as dwelling values declined.

“Lower property prices will eventually help improve affordability, but that benefit is being offset by higher borrowing costs. Until households have more certainty about interest rates and their financial position, it's difficult to see a sustained recovery in buyer demand,” he said.