The deterioration is broad-based, affecting nearly every major capital city. Brisbane experienced the sharpest monthly drop, with values falling 1.5% in September. Every suburb in the Queensland capital recorded lower prices compared to June, reversing an 18% surge seen over the preceding 12 months. The median Brisbane home is now worth approximately $1.05 million, down by $59,000 since May. Sydney, which has led the national slide, saw values drop 1.4% in the month, equating to a $112,000 reduction from its record high in March. Melbourne prices fell 0.7%, while Darwin was the only capital to see an increase, rising 0.4%.
Perfect storm of rates and tax changes
AMP chief economist Shane Oliver has deepened his forecast, now expecting a 10–15% peak-to-trough decline, with a midpoint of 12.5%. This represents a sharp escalation from the 6% decline AMP predicted in July. Oliver identifies four concurrent forces driving the market lower: rising interest rates, Federal Budget tax changes for property investors, record-poor affordability, and weak buyer confidence.
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The RBA lifted the cash rate for the fourth time in 2026 this week, pushing it to its highest level in 15 years. All four major banks had anticipated this move. For a buyer on average earnings with a 20% deposit, this latest hike reduces borrowing capacity by another $11,000, bringing the total hit to nearly $45,000 for the year. Existing borrowers face additional monthly interest payments of roughly $110, with the cumulative increase since January reaching approximately $440 per month. Oliver noted that this burden creates a risk of a “tipping point” for some mortgage holders.
Simultaneously, the Federal Budget has introduced changes to curtail negative gearing—the ability to offset rental losses against other income—and altered capital gains tax rules. These measures have prompted investors to step back from the market. “It makes sense for investors to sit on the sidelines until they see lower prices or higher rents… resulting in a higher starting point rental yield before they invest to compensate for the higher tax rate they now face,” Oliver said.
“It really depends on how far do interest rates rise and when do we actually start to see the RBA moving into a more dovish period where rate cuts might be on the agenda,” said Tim Lawless, research director at Cotality.
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Lawless, whose firm compiles the Home Value Index, predicts that housing values will continue to fall into 2027. He highlighted that 97% of capital city suburbs recorded value declines over the past three months, underscoring the broad-based scope of the negative cycle. Market participants report that buyer confidence has eroded significantly, with interest rates becoming the dominant conversation among hesitant purchasers. One buyer’s agent noted that the traditional spring buying season has not materialized, citing a “sequence of bad news” that has dampened enthusiasm.
The current trajectory suggests the market is not yet halfway through its correction. With the RBA maintaining a hawkish stance and tax concessions for investors reduced, the combination of higher borrowing costs and reduced demand is expected to sustain downward pressure on prices. The next critical factor will be the timing of any future rate cuts, which remains uncertain given the current inflation and growth outlook.
John Harris covers the economy with a focus on trade, financial policy, inflation, markets, and major business developments. He follows economic data, government decisions, central-bank developments, and changes in international commerce. John aims to explain what the numbers show while avoiding unnecessary speculation, giving readers a practical view of wider economic conditions.
