Australian property downturn accelerates as home values fall for fifth straight month

The nation's median property value is now 3.6 per cent below the record high reached in March, according to Cotality's monthly Home Value Index (HVI) released today. The proportion of capital city suburbs recording declines more than doubled through winter, rising from 45.8 per cent in autumn to 93 per cent, highlighting a broad-based weakening.

Sydney continued to lead the downturn, with home values falling 1.4 per cent in August to sit 7.1 per cent below their February peak. Prices in Melbourne and Canberra both fell 1.1 per cent, while Brisbane dropped 1 per cent. Adelaide and Perth recorded declines of 0.8 per cent.

"The combination of a sharp drop in demand and higher than average advertised stock levels are weighing more heavily on Australia's largest housing market," Cotality research director Tim Lawless said.

The national market faces several headwinds, including three Reserve Bank interest rate hikes in recent months and the federal government's decision to restrict negative gearing and increase capital gains tax.

Independent economist Alan Oster pointed to significant geographic variation. "If you go to Perth, they're still going at an annualised rate of 20 per cent," he said. "If you're in Sydney and Melbourne, they're sort of going backwards at around 7 to 8 per cent. I suspect those sorts of trends will continue for a while."

Cotality's data indicates falling demand is driving the downturn, with estimated home sales tracking 15.5 per cent lower than the same time last year and 11.5 per cent below the five-year average. Brisbane, Perth and Sydney recorded the largest declines in transaction activity, with estimated sales volumes down more than 20 per cent compared with a year ago.

Lawless said the downturn was no longer confined to select markets or higher-value segments. "What started as a more concentrated easing across higher-value segments has now become a much more generalised softening, with the vast majority of capital city suburbs recording some level of decline."

Ray White chief economist Nerida Conisbee noted the decline in buyer activity, with fewer people inspecting houses across the country.

Why This Matters

The deepening downturn directly affects homeowners' equity and prospective buyers' ability to enter the market, particularly in Sydney and Melbourne where declines are most pronounced.
Falling property values could reduce household wealth and consumer confidence, with potential spillover effects into the broader economy.
The widening scope of declines — now covering 93% of capital city suburbs — suggests the correction is becoming systemic rather than isolated to premium segments.

Background

Australia's housing market experienced a prolonged boom through the post-pandemic period, with record low interest rates and government stimulus driving prices to historic highs. The Reserve Bank has since raised interest rates multiple times to combat inflation, increasing mortgage costs for borrowers. Separately, the federal government moved to tighten housing tax concessions in the May budget, restricting negative gearing and increasing capital gains tax — policies that had previously favoured property investors. Cotality (previously known as CoreLogic) is a leading provider of property data and analytics in Australia, and its monthly HVI is closely watched by economists and policymakers.

Key Perspectives

Homeowners and investors: Face declining asset values and, for those with variable-rate mortgages, higher repayment costs. Sydney and Melbourne property owners have borne the brunt of the correction so far, while Perth owners continue to see strong annualised gains of around 20 per cent. Prospective first-home buyers: Lower prices may improve affordability, but high interest rates and tighter lending criteria limit borrowing capacity. The fall in transaction volumes suggests many are choosing to wait on the sidelines. Economists and market observers: Views are split on whether conditions will worsen. Alan Oster expects the current divergence — strong growth in Perth, declines in Sydney and Melbourne — to continue. The broader weakening in demand, as seen in inspection numbers and falling sales volumes, points to further downside risk.

What to Watch

Next Reserve Bank interest rate decision: further hikes would increase mortgage stress and likely deepen the downturn.
Spring selling season activity: traditionally a period of higher listings, which could test whether falling demand translates into steeper price drops.
The spread of declines from premium suburbs to more affordable areas — the recent broadening to 93% of suburbs suggests the correction has further to run.

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