First published 2 Nov 2026, 12:01am
Australia's housing downturn has deepened as previously strong markets continue to lose momentum .
Australian home prices fell for a seventh consecutive month in October, with the downturn broadening and higher interest rates continuing to weigh on housing demand.
National home prices declined 0.3% over the month and are now 4.3% below their March peak and 1.9% lower than a year ago.
Sydney has overtaken Melbourne as the capital with the deepest correction, while Brisbane and Perth have now fallen almost 6% from their recent highs. Adelaide recorded the largest monthly decline among the capitals.
The sharp reversal in previously strong markets highlights how higher borrowing costs and stretched affordability are increasingly constraining purchasing power.
Spring has brought more choice for buyers, but not the usual lift in market momentum. Softer auction conditions, longer selling times and subdued sales activity suggest buyers are becoming more cautious.
The adjustment remains uneven. Regional markets continue to outperform the capitals, while units have generally held up better than houses as affordability increasingly shapes demand.
With inflation proving persistent and the likely prospect of further interest rate tightening, weaker housing market conditions are likely to extend into 2027.
Australia's housing downturn deepened in October, with national home prices falling 0.3% and extending the current correction into a seventh consecutive month.
Prices are now 4.3% below their March peak, while annual growth has fallen to -1.9%.
The current downturn has unfolded quickly. National prices have fallen more than 4% in seven months, with the adjustment increasingly widespread across capital city markets.
Sydney has overtaken Melbourne as the capital city with the largest home price decline since prices peaked. Picture: Getty
Higher interest rates remain the dominant constraint on housing demand. As mortgage rates rise, prospective buyers face reduced borrowing capacity, limiting what they can afford to pay. Higher repayments also weigh on household budgets and confidence, encouraging some buyers to delay purchasing decisions.
Sydney and Melbourne entered the correction earlier, but some of the sharpest recent declines are now occurring in Brisbane, Adelaide and Perth, where years of exceptional growth have substantially eroded affordability.
The fast reversal in these previously resilient markets points to a deepening downturn as higher borrowing costs constrain purchasing power and weigh on buyer demand.
Sydney has overtaken Melbourne as the capital with the largest decline from peak.
Sydney home prices fell 0.4% in October and are now 6.7% below their November 2025 peak and 6.6% lower than a year ago.
Melbourne prices declined a more modest 0.1% during the month, leaving them 6.1% below their October 2025 peak and 6.1% lower year-on-year.
While Sydney's correction is now deeper, Melbourne's longer period of underperformance remains. Melbourne is the only capital where home prices are lower than five years ago, down 3.5%.
Its median dwelling value of $815,000 remains below Brisbane's $1,014,000, Perth's $949,000 and Adelaide's $907,000. That represents a substantial shift in relative affordability, compared to years prior.
Melbourne is also further into its downturn than most other capitals, and some of the price adjustment has already occurred. Its improved relative affordability may increasingly help cushion further falls, although borrowing capacity remains constrained.
The correction remains more pronounced for houses than units in both cities.
Sydney house prices are now 8.2% below peak, returning to levels last seen in April 2024. Melbourne house prices have fallen for twelve consecutive months and are 7.2% below peak, returning to early 2023 levels.
By contrast, Melbourne unit prices edged higher in October after seven consecutive monthly declines. This tentative stabilisation highlights how affordability may be providing some support to the unit market, although one positive month is insufficient to establish a sustained trend.
The correction has also been particularly pronounced in higher priced suburbs. House prices in Melbourne's Inner East are 12.4% below peak, while Sydney's North Sydney and Hornsby region has experienced a 12.1% decline.
Higher priced housing markets can be particularly sensitive to reductions in borrowing capacity, although local supply conditions and buyer composition also influence performance.
Brisbane, Adelaide and Perth are experiencing a rapid turnaround in housing market conditions.
After several years of exceptional growth, all three markets are now experiencing sustained declines as higher borrowing costs collide with substantially higher home prices.
Adelaide recorded the largest monthly fall of any capital in October, with prices declining 0.6%. Prices have now fallen for five consecutive months and are 3.4% below their May peak. Despite the correction, Adelaide home prices remain 3.1% higher than a year ago and 61.4% above levels five years earlier. Though the annual growth masks a much weaker picture in recent months.
Brisbane home prices fell 0.4% in October, extending the downturn to seven consecutive months. Prices are now 5.8% below their March peak, despite remaining marginally higher than a year ago.
Property prices in Perth have fallen for seven consecutive months. Picture: realestate.com.au/sold
Perth has experienced a similarly sharp reversal. Prices declined 0.3% in October and are now 5.7% below their March peak, following seven consecutive monthly falls.
Over the past five years, Brisbane and Perth prices have increased 54.6% and 74.8% respectively. Those gains have substantially reduced the affordability advantage that previously supported demand in both markets.
The recent pace of declines is now particularly pronounced. Over the latest three months, home prices have fallen at an annualised rate of approximately 10% in Adelaide, 9.5% in Brisbane and 8.1% in Perth. These are measures of recent momentum, not forecasts of future annual price declines, but they illustrate the speed with which conditions have changed in markets that had previously led national price growth.
The broadening correction is also evident beneath the capital city figures.
Some of the deepest declines remain in established Sydney and Melbourne housing markets, where prices have been falling for longer. Melbourne's Inner East is now 10.8% below its previous dwelling price peak, while Sydney's Baulkham Hills and Hawkesbury and North Sydney and Hornsby regions have fallen 9.6% and 9.5% respectively.
However, the sharpest recent deterioration is increasingly evident in parts of Brisbane, Adelaide and Perth. Over the three months to October, dwelling prices fell 4.2% in Adelaide's South, 3.7% in Brisbane's South and 3.6% in Mandurah.
The house price adjustment has been particularly pronounced in Brisbane's South, where prices fell 4.0% over three months.
Unit markets are also showing significant local variation. Mandurah unit prices have fallen 16.5% from peak, while Adelaide's South recorded a 5.5% decline over the latest three months.
These shifts highlight that Sydney and Melbourne regions retain many of the deepest local downturns, but the fastest recent declines are increasingly occurring in markets that were resilient for longer.
Regional housing markets continue to outperform the combined capital cities, although the broader slowdown is becoming increasingly evident outside the capitals.
Regional areas have proven more resilient to price falls than the capitals. Picture: realestate.com.au/sold
Regional home prices fell 0.1% in October and are now 1.4% below their peak. However, prices remain 3.1% higher than a year ago, compared with a 3.7% annual decline across the combined capitals.
Relative affordability remains an important source of support. As higher interest rates constrain borrowing capacity, buyers are increasingly making trade-offs around location, dwelling type and property size.
More affordable regional markets can remain accessible to a broader pool of prospective purchasers than higher priced capital city alternatives. However, beneath the index level regional conditions are far from uniform. Some markets continue to record strong annual growth, while others are experiencing sustained declines as higher borrowing costs and weaker buyer demand take effect.
The cumulative impact of monetary tightening is likely to place further pressure on regional housing demand over the coming months, although relative affordability and local supply constraints should provide some support.
The divergence between house and unit prices provides further evidence of how reduced borrowing capacity is reshaping housing demand.
National house prices fell 0.3% in October and are now 4.6% below their March peak. Unit prices declined 0.1% and are 3.0% below peak. The annual divergence is also pronounced, with house prices 2.4% lower than a year ago, compared with a 0.2% decline for units.
Higher mortgage rates reduce how much prospective buyers can borrow, forcing some households to reassess their expectations around property type, location or size.
For buyers who can no longer afford their preferred house, a unit may provide a more accessible entry point.
Melbourne median dwelling value is now lower than Brisbane's, Perth's and Adelaide's, after years of relative underperformance. Melbourne's median unit value of approximately $642,000 also sits substantially below its median house value of around $952,000. That affordability difference may be helping support unit demand, with Melbourne unit prices edging higher in October even as house prices continued to decline.
However, the relative resilience of units is not universal. Unit prices in Perth and Adelaide have experienced sharper corrections than houses in recent months, while Mandurah's unit market has recorded an exceptionally pronounced decline.
The spring selling season has brought more properties onto the market, but not the usual improvement in housing market momentum.
Auction clearance rates remain soft, homes are taking longer to sell and sales activity remains subdued. Where listings have increased, buyers have more choice and greater negotiating power.
However, greater choice does not necessarily mean improved purchasing capacity. Higher mortgage rates continue to reduce what prospective buyers can borrow and afford to pay, limiting demand even as the capacity to negotiate increases.
The interest rate outlook remains the most important influence on housing market conditions.
Persistent inflation has strengthened the prospect of another Reserve Bank rate increase this week, following four increases already delivered this year. A further increase would reinforce the downturn already underway, reducing borrowing capacity and increasing mortgage repayments for existing borrowers.
The cumulative effect of higher interest rates remains as the full impact of earlier increases is still working its way through household budgets, purchasing decisions and transaction prices.
The prospect of additional tightening can also affect confidence before any further increase occurs, encouraging prospective buyers to delay decisions amid uncertainty about where mortgage rates will ultimately peak.
Changes to negative gearing and capital gains tax are an additional headwind for investor demand, although their precise contribution to recent price falls remains difficult to isolate. Interest rates are the more direct and economy wide constraint, affecting owner occupiers and investors alike.
Further home price declines are likely over the coming months, with weaker housing market conditions expected to extend into 2027, particularly across the capital cities and in markets where affordability has deteriorated most sharply.
The labour market will be critical in determining how far the correction extends. Employment conditions have softened, but widespread forced selling remains limited and many existing homeowners retain substantial equity buffers. As a result, the current downturn is primarily being driven by reduced buyer purchasing power, rather than large numbers of homeowners being forced to sell.
A more pronounced deterioration in employment would increase the risk of mortgage distress and forced selling, potentially amplifying the downturn.
For now, the balance of risks points to further price weakness as elevated borrowing costs, cautious buyers and softer housing market conditions continue to weigh on demand. The downturn has broadened, and the reversal in previously strong markets suggests the adjustment still has further to run.
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