Australia's property market has entered its ninth downturn since the mid-1990s, and if the previous eight are any guide, mortgage brokers should be preparing clients for a turnaround rather than a prolonged slump.
New analysis from Domain's FY2027 Forecast Report points to two forces behind the current slide: three RBA rate rises in the first half of 2026, and the government's negative gearing and capital gains tax reforms, which have prompted some investors to pull back from established property. Even so, the pattern fits a well-worn cycle rather than signalling deeper trouble.
Domain chief residential economist Nicola Powell (pictured) says the market is behaving true to form.
"Downturns can feel sharp in real time, but historically they've been short and shallow, and have not unwound the gains that preceded them," Powell said.
The numbers back her up. Across eight completed downturns since the early 1990s, the average peak-to-trough decline has been just 2.9% over roughly eight months — dwarfed by an average upswing of 32.3% over nearly three years. Even the worst on record, the 2017–19 slump triggered by APRA's crackdown on investor and interest-only lending, fell only 8.5% over 18 months before recovering. For combined capital prices to erase the gains of the recent upswing and return to their March 2023 low, they would need to fall 22.8% — far beyond Domain's forecast range of -2.5% to 1.5% for FY2027.
The pain is uneven. Melbourne, expected to fall 4% to 8%, sits closest to its previous trough and would need only a 6% drop to get there, making it the most exposed capital. Sydney, predicted to fall 3% to 7%, would need a much steeper 19.7% fall to revisit its 2022 low.
By contrast, Perth and Brisbane aren't in a downturn at all — both are set to extend their growth run through the new financial year, on the back of population growth, tight rental markets, and persistent supply shortfalls.
Every past recovery has been triggered by the interest rate cycle turning, and Domain expects the cash rate has peaked at 4.35%, with a first cut pencilled in for mid-2027.
REA Group senior economist Anne Flaherty says the timing matters most for reading the turning point.
"Once we've seen that rates have hit the peak and the overwhelming consensus is that the next move is down, that normally signals a turning point," Flaherty said.
The main risk to that timeline is a delayed cut: each additional 25 basis points of tightening strips around 2.5% from borrowing capacity, pushing outcomes toward the weaker end of Domain's forecast range.
For the full Domain analysis, click here.
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