Australia’s housing market has suffered its sharpest monthly decline in almost three years, with fresh figures suggesting the slowdown is becoming broader and more entrenched as buyers retreat, auction activity weakens and more vendors choose to wait rather than accept lower prices.
Cotality’s July Home Value Index shows capital city home values fell 0.7 per cent during the month, the largest monthly decline since December 2022. Over the three months to July, values dropped 1.9 per cent, marking the steepest quarterly fall in almost three years and raising fresh questions about how the spring selling season will unfold.
Cameron Kusher, Chief Economist at independent property valuation firm Herron Todd White, believes the data points to more than a temporary correction.
“Home values were 0.7 per cent lower in July 2026, marking the largest monthly fall since December 2022,” Kusher said. “The monthly and quarterly changes are pointing to a broad-based market slowdown, and it seems unlikely that anything will change these conditions in the short term.”
Sydney and Melbourne are now worth less than they were a year ago, with values down 1.3 per cent and 2.2 per cent respectively. Perth remains 23 per cent higher over the year, although monthly growth has almost stalled, while Hobart and regional Tasmania are the only markets yet to show a clear slowdown in annual growth.
Auction results reinforce the shift in sentiment. Cotality economist Annabelle Mezieres reported a combined capital city clearance rate of 52.4 per cent for the week ending 26 July, recovering from a recent low of 47.4 per cent in late June but still well below the 68.5 per cent recorded at the same time last year.
Auction volumes have edged higher in recent weeks but remain subdued, with 1,421 auctions held nationally, down 16.9 per cent from the same week in 2025. More telling was the withdrawal rate, with 17.4 per cent of scheduled auctions pulled before reaching the hammer, compared with an average of 11.8 per cent last year. Increasingly, sellers are deciding not to test the market.
The city-by-city results show a market moving at different speeds but largely in the same direction.
Sydney recorded a preliminary clearance rate of 56.1 per cent from 433 auctions, up from 47.4 per cent the previous week. However, almost three in ten scheduled auctions were withdrawn before going ahead, suggesting many vendors remained reluctant to proceed. Among properties that did sell, nearly two-thirds changed hands before auction day as sellers accepted firm offers rather than risk a weaker auction result.
Melbourne held steady at 54.6 per cent, while Adelaide recorded 52.6 per cent, its third weakest result of the year despite hosting 24 per cent more auctions than the same week last year. Brisbane produced the weakest outcome of any capital city, clearing just 30.5 per cent of 134 auctions, down sharply from 72.2 per cent a year earlier. The ACT recorded its strongest clearance rate in nine weeks at 53.1 per cent.
Perhaps the most revealing trend lies beneath the headline figures.
Kusher points to the Cotality Stratified Hedonic Index, which tracks different price segments of the market. Upper-quartile homes have fallen 3.2 per cent over the past three months, while the most affordable quartile has edged 0.3 per cent higher.
The premium end of the market is clearly correcting. Lower-priced homes continue to attract buyers, reflecting ongoing affordability pressures and investor demand
The premium end of the market is clearly correcting. Lower-priced homes continue to attract buyers, reflecting ongoing affordability pressures and investor demand.
A different view from the market
Not everyone interprets the figures the same way.
Nathan Birch, founder of property investment firm B.Invested and a landlord with a portfolio of almost 400 properties across Australia, has criticised what he describes as “doomsday reporting”, arguing that some commentary relies on outdated information and overlooks what is happening on the ground.
“The widely circulated claims that it’s the new tax reforms that have caused property prices in most capital cities to fall by $100,000 or more are based on outdated data, some up to 12 months old, and have nothing to do with current market conditions,” Birch said.
His argument deserves closer examination.
On Melbourne, Birch has a point. The city’s housing market has been underperforming since the extended COVID lockdowns, well before the Federal Government announced changes to negative gearing and capital gains tax in May. Those policy changes may have added pressure, but they did not create Melbourne’s weakness.
His criticism of the data itself is less convincing.
The Cotality Home Value Index is updated monthly using current transaction and listing information. The July figures being analysed reflect present market conditions rather than historical data.
Where Birch offers a genuinely different perspective is at the affordable end of the market.
He says investor demand remains strong for homes priced between $200,000 and $500,000, where higher rental yields continue to attract buyers.
“Markets in low-end affordable cities like Melbourne have had an influx of investor activity and demand is rising and stock is drying up”
“Markets in low-end affordable cities like Melbourne have had an influx of investor activity and demand is rising and stock is drying up,” he said.
That observation broadly aligns with the Cotality figures showing the lower end of the market continuing to outperform premium housing.
Birch also argues that strong migration continues to underpin rental demand. Australian Bureau of Statistics figures support that broader point, with net permanent and long-term arrivals reaching a record 57,270 in January 2026 and almost 495,000 over the previous twelve months.
Vacancy rates remain exceptionally tight across the capitals, while median rents have climbed six per cent over the past year to $739 a week. The rental market continues to tell a very different story from the sales market.
The key difference between today’s slowdown and the correction of 2022, according to Kusher, is the outlook for interest rates.
“Unlike other recent downturns, the big difference this time is that the labour market remains tight and inflation is still too high,” he said. “It appears that interest rate cuts remain some way off, and reductions in rates are usually a trigger for slowing or stopping declines in home values.”
The Reserve Bank met in early August with the cash rate sitting at 4.35 per cent following three increases during 2026. Most major banks believe rates have now peaked and expect cuts to begin during 2027.
Even under that relatively optimistic scenario, the housing market faces many more months without the catalyst that has historically helped stabilise prices.
Looking ahead, the spring selling season is shaping as the most important test since the market turned.
Kusher notes that new listings remain below normal seasonal levels, suggesting many vendors are choosing to delay selling rather than accept lower prices.
“Whether this continues into spring will be telling, as it would suggest many people do not have to sell and can postpone bringing their property to market,” he said.
If the usual spring surge in listings arrives while buyer demand remains constrained by high borrowing costs and softer confidence, downward pressure on prices is likely to intensify.
For buyers, the next six months may offer opportunities that have been scarce since the pandemic. Premium properties are attracting discounts, vendors are negotiating more readily and competition has eased
Mezieres reported about 1,570 homes were already scheduled for auction the following week, with activity expected to build through August. If clearance rates fail to improve, Kusher expects selling times to lengthen and discounting to increase.
Perth illustrates how quickly momentum can change. While values remain 23 per cent higher than a year ago, listings have increased 34.5 per cent, days on market have almost doubled since February and three in ten houses are now selling below their asking price. Birch identifies Perth and Brisbane as the markets most vulnerable after several years of exceptional growth, and the latest auction results suggest Brisbane may already be entering that phase.
For buyers, the next six months may offer opportunities that have been scarce since the pandemic. Premium properties are attracting discounts, vendors are negotiating more readily and competition has eased.
Sellers face a different reality. Higher borrowing costs, longer selling times and more cautious buyers are steadily reshaping expectations. As Kusher argues, the gap between what vendors hope to achieve and what buyers are prepared to pay has become the defining feature of the market.
Whether that gap narrows or widens will largely depend on the spring selling season. If listings rise without a corresponding lift in buyer demand, Australia’s housing slowdown may have further to run.
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