Australia's housing market is experiencing one of its most significant downturns in four decades, with property prices continuing to decline as higher mortgage costs and reduced buyer confidence affect homeowners, investors and prospective buyers.

According to the latest figures released by property research group Cotality, Australian home values declined by 1.2 per cent during October 2026. This represents the seventh consecutive month of falling property prices.

The national housing market has now fallen approximately 6.7 per cent from its peak in March 2026. The decline represents an estimated $63,400 reduction in the value of the median Australian dwelling, bringing the national median value to approximately $884,855.

The downturn is affecting major cities across the country, although some markets are experiencing more significant declines than others.

Sydney has been among the hardest-hit markets. Property values in the city declined by 1.6 per cent during October, leaving the median dwelling value at approximately $1,178,959. This is more than 10 per cent below its February peak and below the level recorded five years ago.

Brisbane and Perth have also experienced considerable declines. Brisbane property values fell by approximately 2 per cent in October, while Perth recorded a 1.7 per cent decline. Both cities had previously experienced substantial property price growth, making the recent reversal particularly noticeable.

Melbourne's housing market has followed a slightly different pattern. Although property values have also declined, the city's market has been adjusting more gradually than several other capital cities. Some buyers are increasingly considering Melbourne because of its relative affordability compared with Brisbane, Perth and Adelaide.

One of the major factors contributing to the downturn is the increase in mortgage interest rates. Higher borrowing costs have reduced the amount many households can afford to borrow, making it more difficult for prospective buyers to enter the property market.

Rising repayments have also placed pressure on existing homeowners, particularly households with large mortgages. Some potential buyers are choosing to postpone purchasing decisions while waiting for greater certainty about interest rates and future property values.

Another important factor is the decline in property sales. Recent figures show that Australian home sales over the previous three months were approximately 23 per cent lower than the same period a year earlier.

Auction activity has also weakened, with clearance rates across the combined capital cities frequently remaining below 50 per cent. Properties are taking longer to sell, and some vendors are offering larger discounts to attract interested buyers.

Changes to federal property taxation arrangements have also affected investor confidence, adding another challenge to an already weakening market.

However, falling prices could create opportunities for certain buyers, particularly first-home buyers and families looking to upgrade their properties. People with sufficient savings and borrowing capacity may find more negotiating power than they had during the previous housing boom.

Economists expect housing market conditions to remain challenging into 2027, particularly if interest rates increase further. The Reserve Bank of Australia is expected to make an important interest-rate decision on 3 November 2026.

The continuing decline highlights the growing affordability challenges facing Australian households. While some buyers may benefit from lower property prices, higher borrowing costs remain a major obstacle to home ownership.