Where are we at now?
The effect of Australia’s housing market downturn varies between cities. Cotality’s August 2026 analysis modelled what falls of 5%, 10%, 15% and 20% from peak values could mean for Australia’s major capital cities.
When Cotality published its August analysis, Sydney was already more than 5% below its peak. They estimated that a total decline of 20% from Sydney’s peak would return overall dwelling values to around May 2021 levels. This reflects how strongly the market rose during the pandemic period.
Melbourne has a smaller buffer because its property values recorded much less growth over the previous five years. According to the modelling, a 20% decline from Perth’s peak would return values to around April 2025 levels.
Sydney dwelling values fell 4.7% over the three months to August and were 7.1% below their February 2026 peak.
Cotality’s September 2026 Monthly Housing Chart Pack, which reports data through August, shows that the downturn became more widespread during August. National dwelling values fell 3.1% over the three months to August, while combined capital-city values fell 3.7%.
More room to negotiate?
For first-home buyers, softer conditions may create more room to negotiate. Nationally, homes took a median of 39 days to sell over the three months to August, compared with 28 days a year earlier. In Sydney, the median selling time was 45 days.
The national median vendor discount widened to 4%. In simple terms, properties were selling for a median of 4% below their original advertised price. The four-week average auction clearance rate was 49.5% at the end of August and had remained below 50% since early June.
Together, these figures point to weaker selling conditions. Some buyers may now have more time to assess a property and negotiate with the vendor.
This does not mean every property has fallen in value or that every seller will accept a lower offer. Results can vary significantly between suburbs. Houses and units can also perform differently. Conditions may vary between lower-priced and higher-priced properties.
Affordability is still difficult
A lower purchase price may reduce the deposit and loan amount required. However, higher interest rates can increase repayments and reduce borrowing capacity.
The September pack reports that the cash rate remained at 4.35% in August following three increases between February and May. Cotality estimated that those increases added just over $350 a month to repayments on an average new owner-occupier mortgage of $735,000.
Cotality also estimated that the amount a median-income household could borrow fell by approximately 7%. A buyer may therefore find a property at a lower price but still be able to borrow less because interest rates are higher.
Should buyers wait?
Trying to identify the exact bottom of the market is difficult. Prices may fall further, but there is no reliable way to know exactly when the market will reach its lowest point.
Meanwhile, national rents were still rising at an annual rate of 5.7% in August. Interest rates and lending policies can also change while a buyer waits.
A practical approach is to understand your financial position before focusing on market predictions. Work out how much deposit you have and what repayment you could comfortably manage each month. Allow for costs such as stamp duty and conveyancing, where applicable. Try to retain some savings for unexpected expenses after settlement.
Current selling conditions may give some prepared first-home buyers more time to assess properties and negotiate. Whether buying now is suitable will depend on the property and the buyer’s financial position.
Source: Cotality, Monthly Housing Chart Pack, September 2026, and Cotality’s August 2026 housing-market analysis.
General information only. Lending eligibility and borrowing capacity are subject to lender criteria and individual circumstances.