Australia’s housing downturn is continuing to worsen, marking a seventh consecutive month of declines as more than $60,000 is wiped from home values since March.
The housing market weakened further through the middle of spring, with Cotality’s national Home Value Index (HVI) falling another 1.2 per cent in October.
The ongoing drop has left national dwelling values 6.7 per cent below their March peak, equivalent to approximately $63,400 in lost value for the median Australian home.
Cotality research director Tim Lawless said housing demand is being weighed down by multiple factors, despite the ongoing shortage of new builds.
“Affordability and serviceability constraints were the earliest factors weighing on housing demand, with these headwinds amplified by four interest rate hikes, persistently low confidence and ongoing cost-of-living pressures,” Lawless said.
“The federal budget has added to the downside pressure since mid-May.”
The downturn is now moving faster than any other over the past 40 years, with combined capital city dwelling values dropping 8.1 per cent in just seven months.
By comparison, during the 2017-19 downturn – which was the largest peak-to-trough decline on record at -8.2 per cent – values had fallen just 1.2 per cent over the same timeframe.
While Sydney has shouldered substantial dollar losses, two other cities are now leading the percentage decline following extraordinary price growth in recent years.
Brisbane and Perth have overtaken Sydney, recording falls of 2.0 per cent and 1.7 per cent respectively in October, compared to Sydney’s 1.6 per cent decline.
The latest figures compound heavy losses over the past three months, during which Brisbane values have tumbled 6.1 per cent, followed by Perth at 5.7 per cent and Sydney at 4.7 per cent.
“The mid-sized capitals, where home values recorded extreme growth conditions over the past six years, are now well and truly in a correction,” Lawless said.
“Virtually every suburb across Brisbane, Perth and Adelaide has recorded a drop in values over the past three months.”
All eight capitals have recorded declines over the past quarter, though Hobart and Darwin recorded modest gains in October.
Despite sharp drops in Brisbane and Perth, owners who bought before the recent boom remain in a stronger equity position than those in Sydney and Melbourne.
Perth values, for instance, could tumble 20 per cent from their peak and still only return to levels recorded around mid-2025.
The same cannot be said for Melbourne, where property values are now 7.3 per cent lower than five years ago. Sydney values have also slipped 1.5 per cent below October 2021 levels.
Marshall White group sales director John Bongiorno, who has worked in Melbourne real estate for nearly 50 years, said sentiment among buyers and sellers was the weakest he had seen in decades.
“In my 45 years in real estate, the sentiment is the worst I’ve seen. This spring is the worst spring since the recession of the early 90s,” Bongiorno said.
Bongiorno pointed to rising interest rates, state property tax changes and tighter investment rules as key drivers of Victorian market uncertainty.
Sellers are feeling the pinch as sales dry up across the country.
Cotality reports the number of homes sold nationally over the past three months was 23 per cent lower than the same period last year. Sydney sales volumes have plunged 30 per cent year-on-year, while Brisbane is down 29 per cent.
Properties are also lingering on the market longer. The median time to sell has stretched to 39 days – the highest level since August 2020.
Auction clearance rates across the combined capitals have consistently sat below 50 per cent, while private treaty sellers are being forced to accept wider discounts.
Even with fewer homeowners listing properties – new stock flows are almost 18 per cent below average – homes are remaining on the market long enough to push total advertised listings across the capitals to their highest level for this time of year since 2019.
“Buyers have a lot more stock to choose from, they have more leverage and there isn’t the same urgency to buy as there was a year ago when home values were rising rapidly,” Lawless said.
“But despite this being a buyer’s market, they are noticeably absent, reflecting low confidence and ongoing serviceability barriers.”
For prospective buyers hoping cheaper property will make homeownership easier, there is a catch.
The Reserve Bank of Australia will meet on 3 November, with another cash rate hike anticipated following higher-than-expected inflation data.
The official cash rate sits at 4.6 per cent following four increases this year.
Cotality says another 25-basis-point increase would reduce maximum borrowing capacities to around 11.5 per cent below pre-hike levels.
For an average buyer, that equates to a borrowing reduction of more than $105,000, eroding the $63,400 drop in the national median dwelling value since March.
With buyers on the sidelines and mortgage costs poised to climb further, Cotality forecasts softer market conditions will continue into 2027.
However, there’s hope that the shortage of new homes being built and continued population growth could prevent a deeper decline, though it will mostly be dependent on inflation, interest rates and the strength of the jobs market.
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