Why Buyers Are Sitting Out a Falling Property Market
Property prices are down six months running and listings are up 23%, yet homes are taking longer to sell. Brokers explain the psychology.
Australia's property market is caught in an unusual paralysis. Home values have now fallen for six consecutive months, recording a national decline of 1.1% in September 2026, with many capital cities posting even steeper drops, according to research firm Cotality. At the same time, the total stock of homes for sale climbed 23.1% in September compared with a year earlier.
By any normal reading of supply and demand, that combination should be drawing buyers in. Instead, the market is stalling. Capital city homes are taking a median 39 days to sell — up from just 23 days a year ago. As Australian Broker reports, the explanation is largely psychological.
The fear of catching a falling knife
Brokers working with buyers right now describe a consistent pattern: aspiring owners who can see that prices are down and listings are up, but who are frozen at the point of commitment.
"First-time homebuyers are just so naturally scared even without the prices falling. And now the fear for them is that they don't want to catch a falling knife, have negative equity within a short period of time, because they don't know when prices will stop falling," Luke Ashby, finance specialist and mortgage broker at Emerge Finance, told Australian Broker.
Nerida Conisbee, chief economist at Ray White, points to a familiar pattern in falling markets: buyers trying to time the bottom and, in doing so, sitting out the window. "I think the problem is that buyers don't like markets where prices are falling, and as a result, we tend to see pretty low levels of activity until people start to feel that it's reaching a plateau," she said.
James Green, director and finance broker at Flint Group Brisbane, identified a reinforcing cycle of media coverage and buyer anxiety. "You've got the rates, the negative gearing, the capital gains changes, coupled with the headlines of how much property prices are dropping. As an individual, if you're looking and consuming the media, then 100% it's causing fear. There are fewer people going to open homes. There's fewer people transacting on property," he said.
The fear has genuine structural roots. Four interest rate hikes in 2026 have reduced borrowing capacity, inflationary pressures persist, and recent Federal Budget changes to negative gearing and capital gains treatment have added uncertainty for investors — which in turn affects the broader market.
Are further falls coming?
REA Group chief executive Cameron McIntyre, whose company owns PropTrack and operates several property platforms, told shareholders at the firm's October 2026 general meeting that conditions could worsen before they improve. "Interest rates are the biggest factor contributing to market uncertainty at the moment. Further price falls are likely over the coming months as last week's interest rate rise, tax changes and the cumulative impact of higher borrowing costs weigh on buyer demand," McIntyre said.
Brad Duggan, chief executive of Metricon Homes — Australia's largest residential home builder — said confidence in Victoria had reached critically low levels. "The commentary we're hearing is eroding confidence and making some buyers question whether owning a home is even possible anymore. We have almost lost our mojo here. The demand is still there but many people are choosing to sit on the sidelines," Duggan told Australian Broker.
Further price falls are not a certainty, but several indicators — including the 39-day median selling time and the 23.1% rise in unsold stock — suggest buyers are not close to capitulating on their caution.
The other side of the argument: the window brokers are seeing
For all the fear circulating in the market, experienced brokers are pointing their clients to a more nuanced picture — particularly first-home buyers who were entirely priced out six to twelve months ago.
"It's the market that many borrowers have been screaming out for, for a long time," said Ashby. "Many of the first-home buyers who couldn't afford to get into the market six months ago, they're now looking at the reality of perhaps it is a possibility now. It's the best window I've seen in six years."
Ashby's argument is grounded in the long-term nature of property ownership. Buyers entering the market today are not buying to flip in six months — they are buying to live in a property for years, or to hold through a market cycle. Short-term price movements matter far less in that context than whether the repayments are sustainable and whether the property suits their needs. Rents, meanwhile, are rising sharply as vacancies remain tight — which raises the real cost of waiting.
Green agreed: "In terms of the purchasing side, at the moment, there is probably some of the best buying I've seen in a long time. The right educated people with the right advice and professionals in their corner are taking advantage of the market."
What this means if you're watching from the sidelines
The most useful move right now is to separate the market noise from your own financial position. What can you actually borrow at current rates? What does a sustainable repayment look like? Those answers don't depend on whether prices fall another 2% or stabilise next month.
Use our borrowing power calculator to get a current number based on your income and expenses, and check first-home buyer loan options to understand what schemes and support are available to you.
If you're already in the market and concerned about your equity position following recent price declines, a loan review is worth doing regardless. Variable rates have risen significantly in 2026, and refinancing options may uncover savings that offset some of the broader market pressure.
Timing the exact bottom of any market is notoriously difficult — even professional economists get it wrong repeatedly. What you can control is the quality of the loan you take out, the advice you receive before signing, and whether your repayments are genuinely sustainable across a range of rate and price scenarios.