Falling House Prices: What Buyers Need to Know in 2026

A majority of Australians now support falling house prices, and major banks are forecasting declines of up to 10% — here's what it means for buyers.

What the Polling and Market Data Are Showing

Support for falling house prices has reached its highest level in recent memory. New polling from Resolve Political Monitor, reported by Nine newspapers, found that 61% of Australians now want house prices to fall — up from 54% in June.

The finding cuts across political lines. Support is strongest among Labor voters at 73%, but majorities of Greens (63%), Coalition (58%), uncommitted (62%) and One Nation (55%) voters are also in favour. Perhaps the most striking figure: 66% of property investors surveyed said they, too, wanted to see prices fall.

Resolve pollster Jim Reed said the finding "might be somewhat surprising" but reflects a widespread belief that only a significant price correction will make homeownership achievable for prospective buyers — particularly younger Australians who have been priced out of the market by years of gains.

The market data backs the sentiment. Auction clearance rates have softened, with several consecutive weeks below the 50% mark before rebounding to nearly 55% last week, according to Cotality's latest figures. Multiple major banks now forecast price declines of between 6% and 10% across national markets through to the end of 2027.

The city-by-city picture is mixed. Westpac expects Sydney prices to fall 3% and Melbourne prices to fall 4% across calendar 2026. Brisbane, Perth and Adelaide are forecast to keep growing, but at a slower pace. HSBC has flagged that even the stronger markets are likely to be affected as any downturn broadens. Commonwealth Bank expects flat national price growth overall for 2026.

"Over the past couple of months, we have clearly seen momentum in the housing market slow down," said CBA senior economist Trent Saunders. "Price growth has slowed, auction clearance rates have declined and homes are taking longer to sell." He noted that while supply, demand and interest rates shape longer-term trends, "in the short term, sentiment can be a key driver of housing market activity."

MPA Australia has covered this market shift in detail — read the full breakdown and survey data here.

The Budget Effect: What Negative Gearing and CGT Changes Mean

A substantial part of the current market cooling is tied to this year's federal Budget, which made significant changes to investment property rules.

From 1 July 2027, negative gearing will be limited to new-build residential properties. Investors will no longer be able to offset rental losses on existing properties against wages or other personal income — losses can only be claimed against rental income or future capital gains from that same property. Properties already held before Budget night are grandfathered under the existing rules.

The capital gains tax discount is also changing. From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships will be replaced with cost base indexation and a 30% minimum tax rate on gains. New-build investors can choose between the old and new methods, preserving a financial incentive to build rather than buy established stock.

Westpac estimates the Budget reforms will drive a 34% fall in new investor activity, with overall housing market turnover expected to fall by around 20%. Not everyone is convinced the changes will achieve their stated aims. Outgoing Finance Brokers Association of Australia chief executive Peter White and Property Investment Professionals of Australia chair Cate Bakos have both warned that reduced investor participation risks tightening rental supply and pushing rents higher — a concern shared widely across the property industry.

What the Numbers Mean for Buyers and Investors Right Now

The recent Domain Profit and Loss Report, covering resale activity in the second half of 2025, offers useful context for anyone weighing their options. Nationally, the median resale profit on a house was $440,000, compared with $228,000 for a unit. Sydney's median house resale profit was $750,000. In Brisbane — one of the country's strongest apartment markets — the median house resale profit was $580,000 versus $325,000 for units, even as 99.1% of Brisbane apartment resales still recorded a profit at that market peak.

Those figures matter because they reflect what buyers pay and what sellers actually receive over time — not what tax rules say on paper. Houses have historically delivered stronger capital growth, partly because they offer adaptability that apartments do not: the ability to renovate, add rooms, build a granny flat, or create dual-occupancy arrangements that lift both rental income and underlying value.

For first home buyers, the current market shift creates a negotiating window that hasn't existed for several years. Homes are taking longer to sell, clearance rates remain below historic norms despite the recent rebound, and major banks are openly forecasting further softening in Sydney and Melbourne. The key risk to factor in is interest rates — an August RBA hike remains on the table, which would directly affect your borrowing capacity. Our borrowing power calculator lets you model how different rate scenarios affect how much you can borrow.

For investors, the decision is more complex now than it was twelve months ago. The Budget changes reshape the economics of existing-property investment materially. Before committing, it's worth running the numbers carefully — our repayment calculator is a useful starting point for understanding what different loan amounts and rates actually cost per month before factoring in rental income.

The housing market is in a genuine transition. Whether that creates opportunity or risk for you depends on your position, your timeline, and how clearly you understand what you can realistically borrow and service under current — and potentially higher — rate conditions.