Sydney and Melbourne are leading a national decline in house prices while regional markets continue to outperform and defy a downturn. The falls in the major cities are the biggest since 2022 and are shaping up to be a “defining economic issue” for the rest of 2026.
Sydney home prices dropped 1.2 per cent in June while Melbourne fell 1.0 per cent, according to property data firm Cotality’s monthly home price report released today. Sydney’s median price is currently $1.265 million while Melbourne’s is $808,486.
“The downward revision reflects a market that is changing rapidly,” Cotality’s research director Tim Lawless said. “Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions.”
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Adelaide prices were flat in the month for the first time since early 2025. The pace of growth in the other mid-sized capitals was significantly slower, but Brisbane still grew 0.3 per cent and Perth was up 0.7 per cent. There was growth in Hobart and Darwin but prices fell 0.6 per cent in Canberra.
“Speaking to people on the ground, some more anecdotal evidence does suggest there’s been a pretty sharp pullback in investment activity already,” Lawless told AAP.
“But I’m not hearing much about first home buyers becoming more active at a time when affordability is improving and buying conditions are improving. I think confidence is just too low.
“Whether or not this is an end to what people are describing as a super cycle, I simply don’t know.”
Sydney and Melbourne prices are leading a downturn. · Cotality
So far Sydney home values are down 3.6 per cent from their peak. The pullback is tracking about the same as previous cycles. In 2022, when housing markets retreated off the back of the Reserve Bank’s rapid interest rate hiking following the Covid pandemic, they were down about 8.5 per cent at the same stage of the downturn, Lawless said.
But falls are expected to deepen judging from ongoing low auction clearance rates and data showing asking prices are plummeting at a faster pace.
Louis Christopher, managing director of SQM Research, said the firm’s data shows “Sydney asking prices falling quickly now”, with combined dwellings seeing asking prices down 2.8 per cent for the month.
Free standing houses are down 6.4 per cent from their peak about four months ago. “Thats $141,000 taken off the asking price for a Sydney house since February,” Christopher said.
Sydney asking prices are dropping quickly in recent months. · SQM Research
Reacting to the asking price data from SQM, economist Stephen Koukoulas noted falls in asking prices are “widespread and gathering momentum.”
“Today’s asking prices are tomorrow’s actual prices,” he said. “The fall in house prices will be a defining economic issue in the next six months.”
The RBA is watching the softening housing market as it responds to stubborn inflation.
The minutes released yesterday for the RBA’s latest meeting, which saw rates held steady at 4.35 per cent in June, showed the Board is still on edge about inflation risks in Australia but noted the impact of the weakening property market in dampening general economic demand.
“Members also noted the risks associated with a potentially material weakening in housing markets, including if this were to inhibit growth in consumption,” the minutes said.
with AAP
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