Australia's housing market has recorded a sixth consecutive month of falling values, putting the current downturn on course to become the worst in four decades. National property values dropped 1.1 per cent in September, pushing total losses since the March peak to 5.2 per cent, according to data released by property analytics firm Cotality. The national median dwelling value has now slipped to $899,236 — roughly where it stood a year ago.
A Downturn Deeper Than Any in Recent Memory
The scale and speed of the current correction has now surpassed that of the 2022/23 downturn, which was itself considered one of the most significant on record. Cotality research director Tim Lawless described the current decline as moving "just a little bit more rapid" than that previous episode.
"This is just a little bit more rapid than what we're seeing through that previous period of decline, which was one of the largest corrections on record," Lawless said. "But it was really short and sharp. I think this one's quite sharp, clearly, but I'm not sure how short it's going to be."
Brisbane overtook Sydney as the city posting the steepest monthly fall, down 1.5 per cent in September, compared to Sydney's 1.4 per cent. Sydney home values are now 8.6 per cent below their February peak.
Several mainstream economists have forecast a peak-to-trough decline of between nine and 13 per cent nationally. However, with the Reserve Bank of Australia having delivered another 25-basis-point rate hike this week — and no cuts expected until at least late 2027 — Lawless warned the downturn could run further still.
Declines Now Spreading Across Almost All Suburbs
The downturn is not only deepening — it is broadening. Over the three months to the end of September, 97 per cent of capital city suburbs recorded a fall in value. Early in the downturn, lower-priced segments of the market had shown some resilience, but those pockets of resistance are now largely disappearing.
Lawless pointed to a sharp pullback by property investors as a contributing factor, particularly at the middle-to-lower end of the market where they have historically been most active. He also noted that Labor's federal budget changes to investor tax concessions were amplifying the effect of rising interest rates on prices.
"You could probably add to this broad-based downturn the fact that investors have become much less active than they used to be," he said.
This combination of higher borrowing costs and reduced investor activity is reshaping conditions across the country — a dynamic that echoes broader pressures on household finances. Concerns about household debt and house prices have been building for some time, with affordability now a central political issue. The trajectory of Australia's inflation rate also continues to shape the RBA's approach to monetary policy.
Negative Equity Risk 'Contained' Despite Sharp Falls
Despite the severity of the downturn, the Reserve Bank's half-yearly Financial Stability Review offered some reassurance. The RBA estimated that fewer than one per cent of borrowers are currently facing negative equity, and said most mortgage holders retain sufficient cash flow and savings to weather further market shocks.
Modelling based on Australian Prudential Regulation Authority data suggests that even if housing prices fell a further 20 per cent from current levels, only around five per cent of mortgages would fall into negative equity — well within what the central bank considers manageable.
The most pessimistic mainstream forecasts — around 13 per cent peak-to-trough — remain far short of that stress-test threshold, suggesting systemic financial risk remains limited even as individual homeowners feel the pressure.
Silver Lining for First Home Buyers — Eventually
Lawless suggested that once conditions stabilise — possibly around mid-next year — affordability could meaningfully improve for first home buyers entering the market without competing against investors.
"Once the dust finally settles, maybe around the middle of next year, then fresh home buyers will probably be in a situation where housing is more affordable and there's less competition with investors," he said, adding that on that basis the federal budget changes "would have done what it set out to achieve."
How long the current correction continues will depend heavily on the RBA's rate path — and with no easing expected soon, the housing market appears set for a prolonged period of adjustment.
