The numbers and the map
Cotality's gauge of city home values fell 1.4% in October, taking the cumulative slide to 8.1% across seven months. That string of monthly declines leaves the market on pace for the sharpest fall in about forty years.
The damage is broad but not even. Brisbane posted the largest monthly decline at 2%. Perth followed at 1.7%, Sydney at 1.6%, and Adelaide at 1.2%. As Cotality's research director Tim Lawless put it, "The mid-sized capitals, where home values recorded extreme growth conditions over the past six years, are now well and truly in a correction." He added, "Virtually every suburb across Brisbane, Perth and Adelaide has recorded a drop in values over the past three months."
Why it is happening
The Reserve Bank of Australia has lifted rates four times this year to steer inflation back toward its 2 to 3 percent goal, with price pressures helped along by shocks linked to the US-Iran war and by local capacity strains. A hotter CPI print last week firmed expectations for another move on Tuesday, which Cotality estimates would add 25 basis points and take the typical variable mortgage rate to roughly 6.7%.
That rate cycle has squeezed buyers' budgets. Lawless estimates borrowing capacity is down about 11.5%, or more than A$105,000 ($74,000), which he notes is well above the A$63,400 drop in the national median dwelling value since its March peak. Policy has played a role too: tighter tax breaks for property investors in the May budget have amplified recent declines.
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What could cushion the fall
Past gains offer a buffer. Cotality said earlier upswings leave prices elevated, and even a 20% pullback in Perth from its record high would only take values back to mid-2025 levels. Addressing lawmakers last week, RBA Governor Michele Bullock echoed that view and pointed out that prices remain 50% higher than before the pandemic. "While many are facing budget pressures, only a small share of borrowers are in negative equity or facing severe repayment difficulty," she said.
Supply and demographics may also help limit the downturn. Cotality highlighted persistently low additions of newly built homes. Population growth has cooled from very high recent rates, but it remains positive and continues to add to underlying demand.
What it means for your portfolio
Cotality said risks are still tilted to the downside, and the present downturn is pacing to be the biggest in at least forty years. It flagged potential drags that could keep pressure on activity and values: further RBA hikes, reduced borrowing capacity, tougher repayment metrics, a softer labor market, weak consumer sentiment, and tepid investor demand.
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