Australia's housing downturn broadened through July, with national dwelling values down 1.9% over the rolling quarter and every major capital now recording falling prices over a four-week period, according to Cotality's Monthly Housing Chart Pack for August 2026.
Sydney recorded the steepest capital city fall, down 4% over the three months to July and now 5.3% below its January 2026 peak. Melbourne wasn't far behind, down 3.4% over the quarter and 5.5% off its March 2022 high.
The mid-sized capitals have followed the same trajectory more recently: Brisbane, Adelaide, and Perth all posted their first sustained pullbacks in years, though each remains within roughly 1% of its own record high.
"Sydney and Melbourne are leading the cycle, with the rolling four-week change turning negative late last year," the report noted, adding that "the mid-sized capitals have followed Sydney and Melbourne into the downturn" after a period of stronger growth.
The premium end of the market has taken the brunt of the correction. In Sydney, the top quartile of homes fell 5.2% over the quarter, more than triple the 1.4% drop recorded in the lowest quartile — a pattern Cotality says is typical of interest-rate-driven downturns.
Separately, Canstar modelling suggests a 5% deposit buyer who bought the median Sydney house at January's peak could already be in negative equity, given the city's 5.9% year-to-date fall. Low-deposit lending has surged alongside this risk, with APRA data showing $10.2 billion in new 5%-or-less-deposit loans approved in the six months to March, up 51%. If ANZ's forecast of further falls proves accurate, Canstar estimates that buyer could be up to 9% underwater by mid-2027.
The supply side of the market has shifted decisively in buyers' favour.
Total capital city listings are now 22.6% higher than a year ago, with Brisbane (+39.5%), Perth (+36.4%), and Adelaide (+30.8%) driving much of the increase as properties take longer to sell.
Auction clearance rates across the combined capitals have fallen from around 66% in February to a low of 42.3% in late June and have stayed below 50% since late May.
Vendors are responding with bigger discounts: the median vendor discount across the combined capitals widened to 3.9% in the three months to July, up from 3.2% in April.
Median days on market nationally has stretched to 35 days, up from 29 a year earlier, with the increase more pronounced in the capitals than in regional areas.
The Reserve Bank held the cash rate at 4.35% for a second consecutive meeting in August, following three hikes between February and May.
Since those increases began, a buyer with the average $735,000 owner-occupier mortgage has seen repayments climb by more than $350 a month, while borrowing capacity for a median-income household has fallen by 7%, or over $53,000.
Despite the hold, Cotality's report cautioned that "auction outcomes and trends in home values have shown a strong correlation historically, implying further downside pressure on home values" in the months ahead.
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