Update, 26 September 2026. The falls continued through August. Cotality’s national index dropped 0.9% in the month, a fifth straight decline, leaving values 3.6% below the March peak. The national median is $912,885, still 2.7% higher than a year earlier. Sydney fell another 1.4% and is 7.1% below its February peak. Darwin was the only capital to rise over the three months to August. The RBA held at 4.35% on 11 August and next decides on 29 September. Read what the August hold means for investors.
Australian home values fell 0.7% in July, the steepest monthly decline since December 2022. It was the fourth straight fall since the Australian property market peaked in March. That is the headline from Cotality’s latest Home Value Index. On its own it sounds like the start of something ugly.
The headline hides the real story. Over the year to July, five capitals grew between 9% and 21%, one barely moved, and two went backwards. There is no single national downturn in those numbers. The correction is concentrated in specific markets and specific price points. Other markets keep climbing through it.
What the Latest Cotality Data Shows
The national index fell 0.7% in July and 1.9% over the three months. Sydney is leading the falls, down 1.4% in July and 4.0% over the quarter. Melbourne fell 1.2% in July. Brisbane and Adelaide, which held up through autumn, have now joined them with falls of 0.6% and 0.2%.
At the other end, Darwin rose another 0.8% in July with annual growth of 16.3%. The annual numbers show how wide the spread has become.
Perth added 20.5% over the year to July. Darwin added 16.3%, Brisbane 14.8%, Adelaide 10.5% and Hobart 9.3%. Canberra managed 1.0%. Sydney (-2.0%) and Melbourne (-2.8%) went backwards. The national figure of 5.3% annual growth is an average of markets that have almost nothing in common right now.
Regional Australia is still outperforming the capitals, but the gap is closing. The combined regional index slipped 0.2% in July, its first fall since January 2023. Over the quarter it was down just 0.1%, against a 2.5% fall for the combined capitals. Regional SA (+1.4%) and regional WA (+0.9%) still rose in July.
Premium Suburbs Are Falling First
Within cities, the falls are uneven too. Upper-quartile home values fell 3.2% nationally over the three months to July, while the lower quartile rose 0.3%. The expensive end of Sydney and Melbourne is where this correction lives.
That pattern is familiar. Premium markets swing hardest in both directions because their buyers carry the biggest mortgages and feel rate changes first. Affordable markets, the segment we buy in, are showing nothing like it. The affordable versus blue-chip data has pointed this way for years. This downturn is proving the point in real time. More affordable markets with tight rental supply are holding their value or still growing while the prestige end reprices.
Why Buyers Have Pulled Back
Three forces are driving the correction.
Rates. The RBA has lifted the cash rate by 75 basis points across 2026 to 4.35%, then held at its June meeting. Higher repayments have cut what buyers can borrow, and serviceability hurdles are biting even where intent is strong.
Tax changes. The Federal Budget’s negative gearing and CGT changes are weighing on investor demand for established dwellings. Cotality expects a sharp pullback in that segment, and it showed up early in the sales data.
Confidence. Capital city home sales over the three months to June ran 16.2% below the same period last year and 14.5% below the five-year average. Auction clearance rates have sat below 50% since late May. In June, advertised stock across the capitals was almost 11% higher than a year earlier. Cotality is blunt about why. Sellers are not flooding the market. Buyers have thinned out, and the stock that does not sell keeps stacking up.
Rents and Yields Are Still Climbing
While values soften, the rental market has not blinked. Cotality’s national rental index rose 0.4% in July and 5.9% over the year. National rental vacancy rose to 1.7% in July on Cotality’s measure, still well below the decade average of 2.4%.
Falling values plus rising rents means yields keep improving. The gross yield across the combined capitals reached 3.56% in July, its highest since August 2019. For investors, that is the quiet good news inside a soft market. Every month values drift and rents climb, the growth-and-yield equation tilts a little further toward buyers who can hold.
The caveat is that yields still trail borrowing costs in most suburbs. Variable rates on new investor loans are averaging around 6.4%. Cotality’s May research found only 0.8% of suburbs nationally offered a cash flow positive opportunity at a 20% deposit. Yield strategy in 2026 means picking the small set of markets where the numbers genuinely work. A low price alone does not make a suburb pay for itself.
What This Means If You Are Buying Now
Cotality’s own framing is that conditions are improving for buyers prepared to move against the current. There is more stock to choose from, selling times are longer, auction results are softer and vendors have to negotiate. In Cotality’s words, buyers are regaining leverage.
In a two-speed market, the play depends on where you look. Markets with tight vacancy and strong yields, Darwin being the clearest case, are still rising through the national downturn. The premium end of Sydney and Melbourne likely has further to fall. KPMG’s August outlook expects national house prices to fall 1.1% over calendar 2026. It forecasts Sydney houses down 4.4% and Melbourne down 5.0%, with Darwin the strongest capital at 8.2%. It then expects conditions to stabilise in 2027.
Whatever the RBA does with rates, we would rather buy on fundamentals than keep waiting for the perfect entry. Vacancy, yield, supply pipeline and employment are all knowable today.
What to Watch This Month
The RBA on Tuesday 11 August. Another hike would extend the correction in rate-sensitive markets. A hold would give spring some footing after four months of falls.
July CPI on Wednesday 26 August. The monthly inflation read shapes the spring rate calls. Cotality notes underlying inflation is still above target, which is why the case for another hike has not disappeared.
SQM’s July vacancy numbers, due mid-August. SQM’s national vacancy rate ticked up from 1.2% to 1.3% in June. If it keeps drifting while values fall, the rental squeeze is easing at the margin. If it snaps back, yields keep firming.
Cotality’s August index, due early September. A fifth consecutive monthly fall would confirm the downturn has legs into spring. Watch whether Brisbane and Adelaide’s falls deepen or stabilise.
A Correction at the Top, Not a Crash
The national headline is being dragged down by premium Sydney and Melbourne stock while affordable, high-yield markets keep growing. Values are falling at their fastest pace since December 2022. Clearance rates have sat below 50% since late May. That is exactly when prepared buyers do their best work. The data tells you where the falls are and where they are not. If you want to buy where values are still rising, our buyers agent Perth and buyers agent Darwin pages cover the two markets leading the country.
This is general information only and not financial advice. Speak to a qualified professional before making investment decisions.
If you want to know which markets the data supports right now, book a free call.
Sources:
- Cotality, Home Value Index, August 2026 release (data to 31 July 2026)
- Cotality, Home Value Index, July 2026 release (data to 30 June 2026)
- Cotality, Home Value Index, September 2026 release (data to 31 August 2026)
- SQM Research, National Vacancy Rates, June 2026
- KPMG, Residential Property Market Outlook, August 2026
- RBA, Cash rate target
