Australia’s housing market has entered a markedly different phase, with buyers becoming more cautious, investors reassessing their strategies and sellers adjusting expectations after a series of economic and policy changes reshaped the market over recent months.
Fresh data from Cotality and the Property Investment Professionals of Australia (PIPA) shows conditions have softened across much of the country. While the slowdown is far from a housing crash, the market that rewarded almost any purchase during the post-pandemic boom has become far more selective.
The clearest sign of the change is the national auction clearance rate. Across the combined capital cities, preliminary clearance rates slipped to 52.4 per cent last week, down sharply from 68.5 per cent a year earlier. Behind those figures lie three interest rate rises this year, changes to negative gearing and capital gains tax announced in the Federal Budget, tighter lending conditions and higher household costs following the conflict in Iran and the resulting rise in fuel prices.
Yet the national picture masks very different stories from one city to another.
The slowdown is far from a housing crash, the market that rewarded almost any purchase during the post-pandemic boom has become far more selective
Sydney buyers retreat as premium market cools
Sydney remains Australia’s most expensive housing market, but it is also one of the weakest performers in recent months.
Although the city’s preliminary auction clearance rate recovered to 56.1 per cent last week from 47.4 per cent the week before, it remains well below the 66.6 per cent recorded at the same time last year.
More telling is the growing number of vendors choosing not to proceed with auctions. Almost 30 per cent of scheduled Sydney auctions were withdrawn before going under the hammer, suggesting many sellers are unwilling to test a softer market.
Among homes that did sell, almost two-thirds changed hands before auction day, indicating buyers are negotiating privately rather than competing in heated auction campaigns.
Sydney dwelling values have fallen 1.2 per cent over the past month and are now 4.5 per cent below where they began the year.
Victor Kumar, director of Right Property Group, said the change in buyer behaviour has been dramatic.
Properties that attracted 30 or 40 inspection groups only months ago are now seeing fewer than five, reflecting a buyer pool that has become considerably more cautious and increasingly constrained by borrowing capacity.
The slowdown is not evenly spread across the city.
North Sydney and Hornsby continue to perform relatively well, recording clearance rates above 70 per cent, while the Inner West has also remained resilient. By contrast, the Northern Beaches and Eastern Suburbs have experienced much weaker demand, with some prestige suburbs recording price reductions approaching 10 per cent.
The divergence suggests Sydney is becoming a two-speed market, where relatively affordable middle-ring suburbs continue attracting buyers while premium suburbs face longer selling periods and greater discounting.
One sector remains largely insulated from the residential downturn. Western Sydney’s industrial property market continues to benefit from infrastructure linked to Western Sydney International Airport at Badgerys Creek, with micro-industrial assets still generating yields around 7 per cent.
Melbourne investors change direction
Melbourne has also entered a correction, although the story is becoming increasingly one of changing investment preferences rather than widespread weakness.
The city’s preliminary clearance rate sits at 54.6 per cent, around 15 percentage points below the same period last year, while home values have fallen 4.5 per cent since January.
The city’s economic backdrop has also become more challenging, with Victoria recording the nation’s highest unemployment rate and state debt continuing to climb.
Within Melbourne, however, conditions vary considerably.
The North East remains relatively resilient, recording a clearance rate above 70 per cent, while the North West, home to many Indian-Australian families, has held close to 60 per cent.
Melbourne’s western suburbs have weakened much more sharply, recording one of the lowest clearance rates nationally, while the Mornington Peninsula has also softened considerably.
At the same time, listings have increased almost 20 per cent over the past year, giving buyers more choice than they have enjoyed for several years.
Joey D’Agata, head of strategy at Gameplans, believes Federal Budget changes have fundamentally altered the investment landscape.
Borrowing capacity has fallen substantially for many investors. Someone previously able to finance a $900,000 purchase may now find themselves limited to between $650,000 and $700,000.
He argues this is no longer simply a question of confidence but a structural change that is reshaping investment decisions.
Rather than chasing capital growth, investors are increasingly pursuing stronger rental returns.
Cities including Bendigo, Ballarat, Shepparton and parts of Gippsland continue offering rental yields between 4 and 4.5 per cent, while purchase prices remain substantially below metropolitan Melbourne
Boutique apartment developments are attracting renewed interest, particularly low-rise buildings outside the CBD where rental yields commonly exceed 5 per cent. Townhouses are also proving popular, while recent planning changes allowing granny flats have opened new opportunities for investors seeking additional rental income.
Regional Victoria has also emerged as an increasingly attractive alternative.
Cities including Bendigo, Ballarat, Shepparton and parts of Gippsland continue offering rental yields between 4 and 4.5 per cent, while purchase prices remain substantially below metropolitan Melbourne.
Perth remains strongest, but momentum slows
Perth continues to outperform every other capital city, although even Western Australia’s remarkable housing boom is beginning to lose momentum.
Annual dwelling value growth remains exceptionally strong at 23 per cent, with prices rising almost 9 per cent so far this year.
The city’s median house price has climbed above Melbourne’s for the first time in decades, highlighting the extraordinary strength of Perth’s market since 2021.
Matthew Hughes, chief executive of CPA Group, believes the market is now moving into a more sustainable phase.
Listings have increased by more than one-third over the past year, days on market have almost doubled since February and discounting has become increasingly common.
Around three in ten houses now sell below their original asking price compared with just one in ten earlier this year.
Although Perth’s auction market remains small, buyer confidence has also been affected by higher interest rates, Federal Budget changes and proposed restrictions on limited recourse borrowing arrangements within self-managed superannuation funds.
Longer term, proposed changes to Western Australia’s subdivision rules could create fresh opportunities by allowing many more large residential blocks to be subdivided.
PIPA chair Cate Bakos says Australia’s property market is entering a more disciplined stage of the cycle
Queensland and Adelaide tell different stories
Queensland’s housing market continues to produce mixed signals.
Brisbane’s auction clearance rate has fallen sharply over the past year, yet dwelling values remain among the strongest in the country, rising almost 16 per cent over twelve months.
Tim Graham, director of Hotspotting, believes the strongest opportunities are no longer in detached housing but in units, where affordability pressures and tight vacancy rates continue supporting demand.
He also points to regional Queensland markets such as Rockhampton, Toowoomba, Bundaberg, Mackay and Townsville, where stronger rental yields and major infrastructure projects continue attracting investors despite softer metropolitan conditions.
Adelaide has experienced one of the sharpest changes in sentiment.
Property commentator Peter Koulizos says the turning point arrived immediately after the Federal Budget, when proposed changes to negative gearing and capital gains tax unsettled investors almost overnight.
Auction clearance rates have eased, selling times are lengthening and vendor discounting has become more common.
Developers who purchased sites during the market’s strongest years expecting continued rapid price growth now face a much more difficult environment.
Despite the slowdown, Koulizos does not believe Adelaide is facing a housing crash. Employment remains relatively strong, major defence projects continue supporting economic activity and forced selling remains limited.
Opportunities emerging beyond the major capitals
Some of the country’s strongest investment opportunities now lie outside Australia’s largest cities.
Tasmania continues attracting both investors and owner-occupiers seeking comparatively affordable housing, with Launceston and the state’s North West recording particularly strong annual growth.
The Australian Capital Territory has also become more attractive following planning reforms allowing residential subdivision for the first time and the removal of stamp duty for first-home buyers.
These policy changes are beginning to reshape Canberra’s housing market after several years of relatively subdued activity.
A more selective market
PIPA chair Cate Bakos says Australia’s property market is entering a more disciplined stage of the cycle.
Rather than chasing rapid capital growth, investors are increasingly focusing on affordability, infrastructure, rental demand and long-term fundamentals.
The Australian housing market has rarely moved in unison, and the current cycle reinforces that point.
Perth is moderating after extraordinary gains. Sydney and Melbourne remain in correction territory. Brisbane continues to benefit from population growth despite softer auctions. Adelaide is adjusting after several years of exceptional performance, while regional markets across Victoria, Queensland and Tasmania are quietly attracting growing investor interest.
Attention now turns to the June quarter inflation figures and the Reserve Bank’s August meeting, both of which will influence borrowing costs and buyer confidence during the second half of the year.
For investors, however, one message has become increasingly clear. The market now rewards careful selection rather than broad optimism. Cash flow is replacing capital growth as the primary driver of purchasing decisions, while regional markets, boutique apartments and higher-yielding assets are replacing the speculative strategies that dominated during the boom years.
Sources: Cotality Property Market Indicator Summary, week ending 26 July 2026; PIPA National Market Update July 2026 (Cate Bakos, Victor Kumar, Joey D’Agata, Tim Graham, Matthew Hughes, Peter Koulizos, Sam Spilsbury, Claire Corby); Cotality Daily Home Value Index.
Support Independent Community Journalism
Dear Reader,The Indian Sun exists for one reason: to tell stories that might otherwise go unheard.
We report on local councils, state politics, small businesses and cultural festivals. We focus on the Indian diaspora and the wider multicultural community with care, balance and accountability. We publish in print and online, send regular newsletters and produce video content. We also run media training programs to help community organisations share their own stories.
We operate independently.
Community journalism does not have the backing of large media corporations. Advertising revenue fluctuates. Platform algorithms change. Costs continue to rise. Yet the need for credible, grounded reporting in a multicultural Australia has never been greater.
When you support The Indian Sun, you support:
• Independent reporting on issues affecting migrant communities
• Coverage of local and state decisions that shape daily life
• A platform for small businesses and community groups
• Media training that builds skills within the community
• Journalism accountable to readers
We cannot cover everything, but we work to cover what matters.
If you value thoughtful reporting that reflects Australia’s diversity, we invite you to contribute. Every donation helps us maintain the quality and consistency of our work.
Please consider making a contribution today.
Thank you for your support.
The Indian Sun Team
