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Australian house values fell 1.1 per cent in September, the sixth straight monthly decline, with experts predicting falls of up to 15 per cent. Brisbane and Sydney led the downturn while Darwin was the only capital to rise.
Australian house values fell for a sixth consecutive month in September, with Cotality's Home Value Index dropping 1.1 per cent. The decline takes the cumulative fall to about 5 per cent below March's peak.
Values fell in every capital city except Darwin, which rose 0.4 per cent. Brisbane saw the sharpest monthly drop among the capitals at 1.5 per cent. Sydney fell 1.4 per cent and Melbourne was down 0.7 per cent, its smallest monthly decline. Melbourne property values are now 7.2 per cent below their November 2025 peak and 7.5 per cent lower than the record high set in March 2022.
Sydney decline reflects weak demand
Price declines in Sydney are now slightly deeper than at the equivalent stage of the 2022-23 downturn. Cotality said this highlights how rapidly demand has weakened across the nation's largest housing market. The firm said the downturn reflects affordability constraints, higher interest rates, elevated living costs and weaker consumer sentiment. Cotality research director Tim Lawless said 97 per cent of capital city suburbs recorded value declines over the past three months.
He said this showed the broad-based scope of the negative housing cycle. Mr Lawless predicted housing values would likely keep falling from higher rates, possibly into 2027. I think a 10 per cent to 15 per cent drop is probably a fairly reasonable estimate at the moment, Mr Lawless said. It really depends on how far interest rates rise and when the RBA moves into a more dovish period where rate cuts might be on the agenda.
The Reserve Bank lifted official interest rates by 0.25 percentage points to a 15-year high of 4.6 per cent, following hikes in February, March and May. The federal government's overhaul of capital gains tax and negative gearing, legislated earlier this year, has also weakened conditions. Cotality said less favourable arrangements have already sharply reduced investor demand. Housing turnover has also eased, with national home sales over the past three months tracking 19.1 per cent lower than a year ago.
That figure is 13.3 per cent below the previous five-year average. Sales fell most sharply in Brisbane, down 27.2 per cent, and Sydney, down 26.5 per cent. Mr Lawless said the sharp drop in sales has implications for the broader economy. Lower sales are likely to hit some retail segments as well as stamp duty revenues for state governments.
Resale times lengthen vacancy rises
Capital city homes now take a median of 39 days to sell, compared with 23 days a year ago, leading to an accumulation of advertised supply. The national vacancy rate reached 2 per cent in September, up from a record low of 1.5 per cent in February 2026. This is the highest national vacancy rate since January 2025 but remains well below the pre-COVID decade average of 3.3 per cent.
Mr Lawless said renters may be forming larger households to combat stretched rental affordability. Regional property markets have proved more resilient than capital cities. Regional dwelling values fell 0.7 per cent in September but are still up 5.6 per cent annually. Separate figures from Housing Australia show 102,000 first-time buyers have taken up Labor's 5 per cent Deposit Scheme, with the government estimating one in two first home buyers nationally now use it.
Queensland developer Soheil Abedian predicted further price falls. He said the Middle East war, Labor's budget changes to negative gearing and capital gains tax, and interest rate hikes would continue to dent prices and could push more builders under. He warned that if rates keep rising over the next six to 12 months, construction bankruptcies will increase.
If we have a 10 to 15 per cent reduction in the value of homes, the number of bankruptcies we have witnessed in the last twelve months increases rapidly and will damage the industry more, Mr Abedian said. He wants the government to reverse its changes to property tax breaks and help developers subsidise home builds for first-time buyers. Mr Abedian said construction costs were getting exorbitant and partly blamed unions for demanding wages that were too high.
Economists warn of recession risk
He noted that Q1, an 80-storey tower with 575 apartments, took three and a half years to build. Now we are building a 37-storey building with only 97 apartments, and it is taking us three and a half years, he said. AMP chief economist Shane Oliver said rates have peaked despite some economists predicting another rise in November. He believes the Reserve Bank will leave rates on hold by the November meeting as demand slows.
In a worst-case scenario where the Iran war drags on, oil prices hit 150 dollars a barrel and people lose jobs, Mr Oliver said house price falls could reach 20 per cent. This is already shaping up as the biggest downturn in property prices that we have seen in the last 40 years, Mr Oliver said. He noted the worst-case scenarios in past years were an 8 per cent top-to-bottom fall.
If you have a 20 per cent fall, then you are knocking about 2 per cent off consumer spending, which could tip us into a recession, he said. Four rate hikes this year have reduced what average wage earners can afford. Mr Oliver said the hikes cut what an average earner on 109,000 dollars can afford by about 45,000 dollars compared with January.
Average wage earners can currently afford about a 500,000 dollar property, but average property prices in Australia are around 900,000 dollars. Cotality said housing market conditions are likely to remain under downward pressure over coming months. The latest interest rate increase adds to a formidable set of demand-side headwinds. The report said weaker conditions could persist as affordability constraints and economic uncertainty continue to weigh on buyer demand.
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theage:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
Property Prices Housing Market Property Market Interest Rates Inflation Cotality Property Developer House Prices Home Sales Australian House Prices Cotality Home Value Index Negative Gearing Property Market Downturn
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