Australia , November 2, 2026 — The downturn in Australia’s housing sector has continued for an eighth consecutive month and represents one of the longest periods of decline in property values that the country’s housing market has experienced in recent memory. A combination of higher interest rates, reduced borrowing power, and decreased consumer confidence in making major purchases like homes continue to negatively affect home prices across Australia. This sustained fall in home prices is transforming Australia from a country with one of the strongest housing markets globally, only a few months ago, to a country with a housing market that is struggling to stabilize itself.
How the Decline Has Progressed
Since the peak in March, national residential property prices have been declining consistently. The decline was most rapid during the middle months of the year, with an acceleration in price decreases during those months. According to Cotality, a company that provides data and analysis related to real estate, the national average home value declined by 1.1% in September. As of the end of September, national average home values are now 5.2% below the highest level ever reached. Prior to this decline, national average home values had dropped by 1.2% in August and 1.4% in July. These three months represent a continuation of the trend of declining home values throughout the first half of 2011.
This is a continuation of the previous paragraph. Weakness in housing prices is spreading well beyond the Sydney and Melbourne areas, which were the first to show signs of decline. According to Cotality, home values dropped in 97 percent of all capital city suburbs during the three-month period ending September. Every capital city, with the exception of Darwin, had its own decline in housing prices for the quarter. The fact that housing prices are declining in so many different parts of Australia represents a change from when weakness was primarily limited to the highest priced housing markets within Australia.
Which Cities Are Hit Hardest
The biggest fall of any capital city in September was Brisbane, down by 1.5% in the last 30 days. Next was Sydney which fell by 1.4%, and finally Melbourne dropped by 0.7%. Markets such as Adelaide that were previously resistant to the downward trend are also beginning to see continuous falls, indicating that the decline is spreading from what were once considered the worst-affected areas.
Perth and Darwin are still growing annually, although their monthly momentum has slowed down. Perth was even able to report a double digit increase year-over-year in certain instances. This shows that the impact of affordability issues is being felt much more severely by established markets with high-value properties than by smaller capital cities which historically have had lower prices.
What’s Driving the Downturn
The current downturn is largely driven by higher interest rates, particularly the Reserve Bank of Australia hikes to the official cash rate during 2022. This has reduced the amount of money that potential home buyers can access through borrowing. Cotality’s Research Director, said that the decline is no longer limited to particular areas of the market but is now being seen as a general issue regarding affordability. In addition to higher borrowing costs, a higher cost of living and a decline in consumer confidence have also contributed to decreased overall demand for homes.
The regional markets (which had outperformed major capital cities for the majority of the last two years) are now slowing down too. This is evident by the first monthly drop in the regional index since early 2023. This is an indication that affordability issues are no longer limited to major capital cities. This shows that all buyers across Australia, not just those in high-priced capital markets, are starting to adjust their expectations based on the current high-rate environment.
What Comes Next for the Market
There is no consensus among economists regarding how much lower prices will go before there is some stabilization in the real estate market. On one hand, many economists are looking at what happened during the 2022-23 real estate market correction, which was also driven by rising interest rates. In that case, the rapid decline in prices was short-lived and soon after the interest rates stabilized, the real estate market began to grow again. On the other hand, many other economists believe that affordability issues may continue to put downward pressure on real estate prices for a longer period of time due to the extreme price increases experienced during the recent boom period.
Cotality’s next reading on monthly housing activity, which should be available in a few weeks, is expected to provide the best indication so far as to whether the downward trend is abating or growing stronger. Generally speaking, potential home buyers have seen their negotiating position strengthen over the last several months as homes are taking longer to sell and there are more of them for sale. Homeowners who bought their properties around the time of the market’s peak in March, however, have seen a significant reduction in the value of the “paper equity” they accumulated prior to the downturn.
