Australian home values fall for seventh month

Australia’s property market experienced further weakening in October, as national home values dropped by 0.3%—the seventh straight monthly decline. Current prices sit 4.3% beneath their March high and 1.9% lower compared to the same period last year.

Collective capital city prices also decreased by 0.3%, bringing the total correction to 5.4% from their peak. Year-over-year, prices are now 3.7% lower. Sydney (-0.4%) has now surpassed Melbourne (-0.1%) in terms of the steepness of its decline, with Sydney values down 6.7% from their peak versus Melbourne’s 6.1%.

Housing Market Correction

Among the capitals, Adelaide (-0.6%) suffered the steepest monthly drop, while Brisbane (-0.4%) and Perth (-0.3%) also continued their declines, leaving their prices 5.8% and 5.7% below their respective peaks. Melbourne remains the only capital where home values are still below their five-year-ago levels, down by 3.5%.

Regional property prices fell slightly by 0.1% but remain 3.1% higher than last year, contrasting with a 3.7% annual decline across capital cities. Detached homes continue to face greater downward pressure than apartments, with national house prices dropping 0.3% in October and now 4.6% below their peak.

Interest Rate Impact

Any additional interest rate hikes will likely intensify downward pressure on prices, with the accumulated effect of higher borrowing costs expected to keep prices subdued through 2027. According to Creagh, markets with higher price tags are especially vulnerable to reduced borrowing capacity, though local supply trends and buyer demographics also play a role.

Previously robust markets like Brisbane, Adelaide, and Perth are now undergoing a rapid shift, with prices falling due to tighter affordability and raised borrowing costs. Adelaide recorded the largest monthly decline among capitals at 0.6%, while Brisbane and Perth saw decreases of 0.4% and 0.3%, respectively.

Over the past five years, Brisbane and Perth prices surged 54.6% and 74.8%, respectively, significantly eroding the affordability advantages that once supported demand. Creagh explained that the current pace of declines is particularly sharp, with home prices in Adelaide falling at an annualized rate of roughly 10%, 9.5% in Brisbane, and 8.1% in Perth.

The traditional spring selling season has failed to revive market activity, as auction clearance rates remain weak and buyers exercise greater caution. While more properties are entering the market, affordability constraints are the primary barrier, with higher mortgage rates reducing borrowing capacity and making properties less accessible regardless of their appeal.

Given persistent inflation, the possibility of another Reserve Bank rate increase looms, which could further strain borrowing capacity and buyer confidence. As the effects of past rate hikes continue to affect household budgets and property values, additional price adjustments appear inevitable in the near term.

Proposed changes to negative gearing and capital gains tax policies have introduced additional uncertainty, especially for investors, though their impact remains difficult to isolate from broader interest rate effects.

The primary factor behind the current downturn is diminished purchasing power, rather than widespread financial distress among homeowners. Most owners maintain significant equity buffers, and forced sales remain minimal.

Market Outlook

Further price declines are anticipated in the coming months, with softer conditions potentially lasting into 2027, particularly in cities where affordability has deteriorated most severely.

The delayed effects of past rate increases are still influencing household finances and market forces, suggesting the adjustment phase is not yet complete. The trajectory of interest rates will remain critical in determining property price movements, with borrowing capacity and buyer sentiment under continued pressure.

After seven months of declines, national prices have fallen over 4%—a downturn now spreading across capital cities. Sydney has overtaken Melbourne as the market with the deepest correction, while Brisbane and Perth have each dropped nearly 6% from their recent peaks. Despite its decline, Adelaide’s home prices still sit 3.1% above last year’s levels and 61.4% higher than five years ago. Sydney’s values dropped 0.4% in October, now 6.7% below their November 2025 peak and 6.6% lower annually, marking five consecutive months of declines and a 3.4% reduction from their May high.