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Home values across Australia have declined by 5 per cent from their March peak, with Sydney and Melbourne experiencing deeper falls. All capital cities except Darwin recorded monthly declines in September, while interest rate increases, changes to housing investment taxation and weaker investor demand are expected to keep the market under pressure.
Home values in Australia have fallen by 5 per cent from their peak in March, with Sydney and Melbourne leading the downturn. The national property slump has stretched to six months after a 1.1 per cent fall in September, Cotality’s Home Value Index shows.
Values fell in every capital city except Darwin last month. Price declines in Sydney are now a little deeper than the equivalent stage of the previous 2022-23 downturn “highlighting how rapidly demand has weakened across the nation’s largest housing market”. Melbourne property values are now 7.2 per cent below their peak in November 2025 and 7.5 per cent lower than the record high for property prices registered in March 2022.
But Cotality, a property analytics firm, said the Melbourne property market is now showing a “milder rate of decline” with prices down 0.7 per cent in September, the smallest monthly fall among the state capitals. Property market sentiment has been hit by multiple interest rate hikes this year, along with changes to the taxation of housing investment and lingering economicby 0.25 of a percentage point to a 15-year high of 4.6 per cent in a bid to dampen inflationary pressures in the economy.
That followed hikes in February, March and May. Cotality’s report said housing market conditions are likely “to remain under downward pressure over the coming months with the latest interest rate increase adding to a formidable set of demand-side headwinds. ” The federal government’s overhaul of capital gains tax and negative gearing, legislated earlier this year, has also contributed to weaker conditions in the property market.
“Less favourable negative gearing and capital gains tax arrangements have already seen a sharp reduction in investor demand,” Cotality’s report said. Brisbane recorded the sharpest decline in September, with house prices down 1.5 per cent in the month. Property prices in the city have fallen 5.4 per cent since peaking in May.
Advertisement Tim Lawless, Cotality’s research director, said property values have fallen in more than 90 per cent of capital city suburbs over the past three months, “highlighting the broad-based scope of this negative housing cycle”.
“The housing downturn reflects a combination of affordability constraints, higher interest rates, elevated living costs, and weaker consumer sentiment, all of which have reduced purchasing capacity and dampened buyer demand,” Cotality’s report said. There has also been a sharp decline in housing turnover which threatens to hit stamp duty collections, an important source of state government revenue.
Cotality’s estimates of the number of home sales over the past three months nationally are nearly 20 per cent lower than a year ago and 13.3 per cent below the previous five-year average. The volume of home sales compared to a year ago was down most sharply in Brisbane and Sydney .
“The sharp drop in sales has implications for the broader economy, with lower sales likely to hit some retail segments as well as stamp duty revenues for state governments,” Lawless said. Separate figures released by Housing Australia, the federal government’s housing delivery agency, show 102,000 first-time buyers have taken up Labor’s 5% Deposit Scheme to purchase a home.
The scheme was expanded to all first home buyers a year ago, and the government estimates one in two first home buyers nationally are now using it. Cotality’s report said regional property markets have proved more resilient than in capital cities. Regional dwelling values fell by 0.7 per cent in September but are still up 5.6 per cent annually. Darwin was the only capital city to register a house price increase in September .
Australian Housing Market Home Values Property Prices Interest Rates Negative Gearing
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