Australia housing values weaken as industrial property holds

Herron Todd White has published its August property market review for Australia, reporting weaker housing values, softer prestige property sentiment and lower transaction activity in several parts of the market.

The monthly review points to a broad cooling in residential conditions, alongside continued strength in industrial property and a more mixed picture across rural land. It also includes commentary on renovation activity, entry-level industrial investment and grain cropping conditions.

At the centre of the findings is a sharper downturn in housing data. Values fell 0.7 per cent over the month and 1.9 per cent over the quarter to July, which the firm described as the largest declines since December 2022.

Listing volumes have risen to their highest level since 2020, while time on market has lengthened to 44 days from 27. Typical vendor discounting has also widened to four per cent, the largest concession recorded since May 2023.

Peter Maloney, chief executive officer of Herron Todd White, said the softer market conditions were now being reflected more clearly in the data.

"The discounting figure is the one I would watch between now and Christmas. Four per cent is the largest concession vendors have made since May 2023, and it is telling you exactly what is required to secure a buyer this spring. Many properties simply will not sell, and for most of the rest the only path to a contract is a price cut," Maloney said.

Rates and demand

The review also linked weaker housing turnover to borrowing costs. It noted that the Reserve Bank kept the cash rate at 4.35 per cent for a second consecutive meeting, but said inflation remained high enough for the risk of another increase to stay in play.

Cameron Kusher, chief economist of Herron Todd White, said the hold on rates should not be read as a clear turning point.

"Our working assumption is that borrowing costs remain around these levels for some time yet," Kusher said.

"Higher borrowing costs do not show up first in prices, they show up in transaction volumes. Capital city sales are already materially lower than a year ago. That is buyers stepping back, and prices tend to follow," he said.

The firm's Prestige Index also recorded a notable shift, falling five points to 53 in what Herron Todd White described as the biggest monthly move since the index was launched.

Brisbane dropped from 62 to 50, while the Gold Coast fell from 65 to 55. Sydney and Melbourne both stood at 35, while Perth remained at 80, creating what the firm said was a record 45-point spread between the strongest and weakest prestige markets.

Maloney said the decline suggested the top end of the market was no longer insulated from broader weakness.

"The top end is usually the last part of the market to turn, and in August it turned. A five-point fall is the largest single-month movement since we launched the index, and Brisbane stepping out of Warm territory for the first time tells you how broadly based this shift has become," he said.

"There are 45 points between Perth at 80 and Sydney and Melbourne at 35 - the widest spread we have ever published. Prestige is not one national market at the moment, it is six quite different ones, and anyone generalising about the luxury sector is going to get it wrong," he said.

Renovation pressure

Another section of the review focused on renovation activity. Builder availability has improved in some areas and materials constraints have eased, but product costs are still rising and tax changes have altered the economics of renovating homes for resale outside a principal place of residence.

That combination has made project budgets more important at a time when rising property values can no longer be relied on to cover overruns.

"The reasons people renovate have not changed, but the arithmetic has. For a decade a rising market quietly forgave anyone who paid a little too much for the project or spent a little too much on the work. That safety net is thinner now than it has been in many years," Maloney said.

"The irony is that trades are finally more available and the 12-month waits for a builder are largely behind us, but building product prices have kept climbing, and the capital gains tax changes have changed the economics of renovating to flip outside your own home. Renovate for how you want to live in the house, not for a quick margin," he said.

Industrial contrast

Against the softer residential picture, industrial property remained active. Tenants absorbed about 1.8 million square metres nationally in the first half of 2026, more than half of the leasing activity recorded across all of 2025.

National vacancy remained low, while Greater Brisbane was said to have only four to five years of serviced industrial land supply left at current absorption rates. The report said that constraint was putting further pressure on land values.

"Industrial is the one sector still doing what it is supposed to do. Tenants absorbed around 1.8 million square metres in six months - more than half of everything leased across the whole of 2025 - and vacancy remains exceptionally tight. Investors noticed: transaction volumes in the first half alone topped the entire 2025 year," Maloney said.

"The constraint now is land, not demand. Greater Brisbane has roughly four to five years of serviced industrial land supply remaining at current absorption rates, and the civil works associated with Brisbane 2032 will add further competition for land. That is a structural problem, not a cyclical one, and it is continuing to put pressure on land values," he said.

Rural divide

In rural markets, the review highlighted a widening divergence in grain-producing regions after the El Niño declaration in mid-June. Western Australia was described as coming off a record 27.35 million tonne harvest, while conditions in parts of the eastern states were more dependent on spring rainfall.

Victorian farmland recorded a median value of $14,790 a hectare in the latest data, while New South Wales buyers were said to be more cautious as proposed tax changes remained unresolved.

"The mid-June El Niño declaration makes spring the whole ballgame for this industry. Western Australia is coming off a record 27.35 million tonne result and Victoria has enjoyed a strong start to the season, while parts of southern New South Wales remain much more dependent on a favourable finish to the year," Maloney said.

"Land markets are steady rather than strong. Victorian farmland recorded a median of $14,790 a hectare in the latest farmland values data, and in New South Wales our team is reporting slower funding and buyers who are simply not prepared to meet vendor expectations while the proposed tax changes remain unresolved," he said.