Australia's Housing Downturn Spreads Beyond Sydney and Melbourne

Cotality's July data shows national home values fell 0.7% — the biggest monthly drop since 2022 — as Brisbane and Adelaide join the decline.

Australia's property market recorded its sharpest monthly fall in three-and-a-half years in July, with Cotality's national Home Value Index (HVI) declining 0.7 per cent — the largest single-month drop since December 2022. ABC News reports that the most significant development isn't just the scale of the decline: it's how broadly the downturn has now spread.

The Downturn Is No Longer Just Sydney and Melbourne

For much of 2026, the housing correction was concentrated in the country's two largest cities. Sydney fell a further 1.4 per cent in July, having peaked in January. Melbourne dropped 1.2 per cent, having peaked in November 2025. Together, these cities continue to drive the national headline figure — but July confirmed what many had suspected: the weakness is spreading.

Brisbane recorded a fall of 0.6 per cent, and Adelaide slipped 0.2 per cent. Critically, Cotality has revised its June data downward for both cities, meaning each has now posted back-to-back monthly declines.

"There's been a really rapid deterioration in conditions in Brisbane, which I think has probably been the most surprising trend that we've seen over the last couple of months," said Gerard Burg, Cotality's head of research.

The shift in Brisbane's supply picture tells the story clearly. In February, total available stock sat around 25 per cent below the five-year average — a classic seller's market. By July, that figure had moved to 6 per cent above the average, giving buyers considerably more choice and greater negotiating power.

Perth managed a modest 0.1 per cent gain in July — though this followed a downward revision to June (now -0.5 per cent, not the figure originally reported). Darwin rose 0.8 per cent. Even regional markets, which had been relatively insulated from the correction, began to crack. The combined regional index fell 0.2 per cent in July, its first decline since January 2023. Regional NSW led the weakness at -0.4 per cent, followed by regional Victoria and regional Queensland (both -0.3 per cent). Regional South Australia and Western Australia held firmer, rising 1.4 and 0.9 per cent respectively.

One pattern worth noting: the steepest falls are concentrated at the upper end. Upper-quartile home values fell 3.2 per cent nationally over the three months to July, compared with a 0.3 per cent gain for lower-priced properties. Higher-value and investment-grade stock is bearing the brunt of the adjustment.

What's Behind the Fall — and How Deep Could It Go?

The drivers are interconnected and, in the short term, unlikely to reverse. Three RBA cash rate hikes in 2026 have reduced borrowing capacity and pushed up repayments for variable-rate borrowers. Government changes to negative gearing and capital gains tax have dampened investor demand. The temporary fuel excise discount expired on 2 August, adding further pressure to household budgets. Consumer confidence lifted 4.1 per cent in the Westpac-Melbourne Institute index in July — but from very weak levels, and the index remains well below the highs of late 2025.

Capital city auction clearance rates have sat below 50 per cent since late May — though they have edged up from the low 40s recorded in mid-to-late June. Sellers are increasingly choosing to hold rather than sell into falling conditions, which may act as a natural floor on how far values decline, as new listing volumes slow.

The critical unknown is what the RBA does next. The board meets on 11 August, and the consensus view is that rates will hold. June CPI data showed no increase in underlying (trimmed mean) inflation — softer than markets expected — and most economists believe the cash rate has peaked. That said, the RBA Governor publicly maintained a tightening bias in July, and any upside surprise in inflation or employment data could change the calculus.

Former NAB chief economist Alan Oster, now independent, told ABC News that the market weakness is primarily an interest rate story. He flagged that if unemployment — currently sitting at 4.4 per cent — were to rise toward 5 per cent or above, a more serious correction could follow. "I think if there was a 5 in front of [the unemployment rate], that's getting very close to a recession," he said, adding that in such a scenario he'd expect property falls of 10 to 15 per cent from peak values. Cotality's Burg is more measured, pointing to low unemployment, continued population growth, and constrained new supply as factors that should limit the depth of any downturn. He describes the most likely path as "a prolonged, but not necessarily enormously deep downturn in values across the country."

What This Means for Borrowers Right Now

If you've been sitting on the sidelines, conditions are shifting in buyers' favour. Stock levels are higher than six months ago, competition has eased in most markets, and vendors are becoming more open to negotiation. Melbourne real estate agent Shahid Khan told ABC News that he's seeing more confident first home buyers active in the market — even if some hesitancy around borrowing capacity persists.

Use our borrowing power calculator to understand exactly what you can borrow at current rates, and our repayment calculator to model your monthly costs before making commitments. For first home buyers, softening prices and a likely rate hold may represent a more accessible entry point than we've seen in some time.

For existing owners and investors, if your fixed-rate period is ending soon — or you haven't compared your loan in the past year — check our home loan refinance hub to see whether a more competitive rate is available. The market is moving quickly, and getting your numbers sorted before the August 11 RBA decision is time well spent.