Australia’s biggest bank has dramatically downgraded its property outlook, warning Sydney is facing one of its “quickest and deepest” housing crashes in at least 20 years.
Fresh analysis from Commonwealth Bank reveals national home prices are expected to plunge 9 per cent peak-to-trough, with Sydney and Melbourne copping the brunt of the downturn at 13 per cent and 12 per cent drops respectively.
“Housing market conditions have weakened considerably since our last forecast update on 3 June, three weeks after the Budget,” its report states.
“At the time, we were already expecting a sharp loss of momentum in response to the combined headwinds from the changes to housing tax policy in the Budget, higher interest rates and softer sentiment.
“Even against that weaker starting point, the adjustment over the past three months has been larger and faster than we anticipated. By July, national dwelling prices were already around 2 per cent below their March peak and close to the trough we had previously expected to be reached only in early 2027.
CBA now expects a deeper correction
CBA now forecasts national dwelling prices to fall by 5 per cent over 2026, while the 5-capital city average is expected to decline by 6 per cent.
“We expect the downturn to extend through to April 2027, taking prices around 9 per cent below their early-2026 peak nationally and around 10 per cent below peak across the five-largest capitals,” the report reads. “Prices should then begin to recover, with national dwelling prices forecast to rise by 2 per cent over 2027.
“The more significant change to our outlookis across the mid-sized capitals. In our June update, we expected strong underlying demand and tight supply conditions to prevent outright price declines in Brisbane, Perth and Adelaide, even as growth slowed sharply. Instead, all three markets have now recorded consecutive monthly falls.”
Fresh housing data
It comes as two seperate reports show Australia’s biggest property market is plunging at a pace not seen in four decades, as fresh housing data reveals national home prices fell for the fifth consecutive month in August.
Two new reports, released this morning by REA and Cotality, show the correction in house prices since the federal government’s tax changes is picking up pace.
Price declines spread sharply across Australia’s housing market through winter, with home values falling across 93 per cent of capital city suburbs.
Sydney house prices plummeted 4.6 per cent in the first full quarter since the May budget. If that rate continues, the harbour city is staring down a massive 18.4 per cent annual crash.
On top of that, the latest data shows auction clearance rates have dropped nationally again in the past week — with only 233 of 683 listed homes selling in Sydney over the weekend. That’s a clearance rate of only 34.1 per cent.
MORE: Every Aus suburb named in home price shock
The RBA will meet at the end of this month when it is tipped to raise the cash rate, which could likely put further pressure on prices.
Leading economist Shane Oliver warned the worst is far from over, revealing AMP estimates Australia is only about 35 per cent of the way through the current downturn.
AMP has downgraded its property outlook, now forecasting national prices to plummet 10 per cent top-to-bottom, while Sydney is tipped to crash by 13 per cent before prices finally bottom out in mid-2027.
“We are probably only about 35 per cent of the way through the slump both in terms of the percentage fall and months,” Dr Oliver said.
Capital city suburbs smashed
Cotality’s report showed every capital city except Darwin recorded price declines over the past three months.
Its national Home Value Index fell 0.9 per cent in August, marking a fifth consecutive month of decline and taking national home values 3.6 per cent below the market peak recorded in March.
Cotality’s research director Tim Lawless said the latest figures show the downturn is no longer confined to select markets or higher-value segments.
“What started as a more concentrated easing across higher-value segments has now become a much more generalised softening, with the vast majority of capital city suburbs recording some level of decline,” he said.
The proportion of capital city suburbs recording a fall in home values more than doubled through winter, rising from 45.8 per cent in autumn to 93 per cent, highlighting a much broader weakening in housing conditions.
MORE: Named: Booming Aus suburbs defying ‘gloom’
Sydney continues to lead the pace of declines, with home values down 1.4 per cent in August to be 7.1 per cent below peak levels recorded in February.
The rate of decline in Sydney home values is now outpacing the earlier 2022-23 correction, when home values were down 6.6 per cent over the equivalent period following the market peak.
“Sydney continues to lead the downturn,” Mr Lawless said.
“The combination of a sharp drop in demand and higher than average advertised stock levels is weighing more heavily on Australia’s largest housing market.”
Melbourne, Canberra (both -1.1 per cent) and Brisbane (-1.0 per cent) are the only other capitals to record a decline of 1 per cent or more in home values over the month. Still, the other mid-sized capitals aren’t far behind, with Adelaide and Perth home values dropping 0.8 per cent in August.
Most capitals are still seeing the more expensive end of the market record weaker conditions than lower-priced housing; however, the performance gap has narrowed as the downturn has become more broadbased.
Higher-value housing continues to record larger declines amid elevated borrowing costs and serviceability constraints, while lower quartile values are now also falling as affordability pressures and weaker demand become more widespread.
“The narrowing performance gap between the upper and lower quartiles is another sign this downturn is broadening,” Mr Lawless said.
“Premium markets are still generally recording weaker conditions, but lower-priced housing is becoming less insulated as affordability pressures and softer demand weigh more evenly across the market.”
‘Further price falls are likely’
REA also released a report this morning showing national home prices fell for the fifth consecutive month in August.
The report found that home prices nationally slipped 0.2 per cent, as nearly every capital recorded price falls – though compared to August 2025, home prices are up 1.8 per cent.
It showed home prices across the capital cities were down 0.3 per cent in August, with declines across every city, bar Darwin (+0.1 per cent). Adelaide led the falls in August, down 0.9 per cent, followed by a 0.4 per cent fall in Canberra, and a 0.3 per cent decline in both Sydney and Brisbane.
Senior economist and report author Eleanor Creagh said the falls came as higher interest rates continue to constrain borrowing capacities and weigh on housing demand.
“While the pace of national price falls eased slightly in August, prices continued to decline across most capital cities,” she said.
“Momentum has slowed in markets that have been among the strongest performers over the past year, with Adelaide recording the largest fall in August.
At the same time, the divergence between capital city and regional markets has widened.
“As affordability pressures are pushing demand toward cheaper markets and dwelling types, both regional and unit markets are proving considerably more resilient,” she said.
“Further price falls are likely to be seen over the coming months, particularly across the capital cities. Uncertainty around tax changes, the outlook for interest rates, and ongoing price falls, continue to weigh on confidence, keeping some buyers on the sidelines.”
Quiet spring expected, big opportunities for one cohort of Aussies
Independent property economist Cameron Kusher warned the market faces a subdued spring selling season as vendor confidence cools and borrowing constraints tighten.
“The amount of stock on the market is still really high, but it looks like people are deciding not to bring more stock to the market,” Mr Kusher told news.com.au.
“Usually, you see a bit of a ramp-up in new listings from mid-August onwards, but that doesn’t really seem to be happening. Only people who really need to sell are putting their properties on the market at this stage.”
While the lack of frantic listing activity suggests widespread market distress is limited, looming Reserve Bank rate decisions threaten to drag buyer demand down further.
“The rate of decline is accelerating and broadening, and that’s likely to continue over the coming months because we’re not seeing a lot of interest from buyers,” Mr Kusher said.
“It’s looking more likely that the RBA will have to increase interest rates. The next interest rate hike gets us back to levels we haven’t seen for 15 years, and that will be a shock to the system for a lot of borrowers.”
Despite the challenging environment, Mr Kusher highlighted that shifting market dynamics are creating distinct entry points for specific buyer groups, particularly upgraders and first-home buyers.
“Even though prices are falling, there are still opportunities,” he said.
“If you’re looking to upgrade, your property is going to sell for less, but the property you’re buying is likely to have seen a bigger discount.
“With fewer investors in the market, there are clearly opportunities for first-home buyers to enter. The advice to them would be: don’t try to pick the bottom of the market, that’s very hard to do, but there are opportunities to buy properties at a significant discount compared to six months ago.”
Regional prices also slipping
As major city suburbs see prices fall, the regions are copping it too.
Cotality data shows the combined regional index was down 0.4 per cent in August, taking regional values 1.2 per cent lower through winter.
Regional South Australia was the only broad rest-of-state market to avoid a decline in values over the past three months, highlighting a deteriorating trend across regional Australia.
This weaker phase of the housing downturn has been largely driven by declining demand, with Cotality’s quarterly estimate of home sales tracking 15.5 per cent lower than at the same time last year and 11.5 per cent below the five-year average.
Brisbane, Perth and Sydney have recorded the largest declines in transaction activity, with estimated sales volumes down more than 20 per cent compared with a year ago.
“The softer trend in values is underpinned by weaker transaction activity,” Mr Lawless said. “Sales volumes are tracking well below both year-ago levels and the five-year average, which points to a clear reduction in buyer demand.”
As demand has weakened, homes are taking longer to sell and listings have accumulated. Across most capital cities, advertised supply is now tracking well above both year-ago and five-year average levels. Over the four weeks ending August 30, capital city listings were 24 per cent higher than a year ago and 8 per cent above the five-year average.
This rise in listings comes despite fewer new listings, with the flow of freshly advertised homes added to the market tracking 6 per cent lower than a year ago and 8 per cent below the five-year average.
“Higher advertised stock levels are simply a factor of a slower rate of absorption,” Mr Lawless said.
“Longer selling times, larger vendor discounting and persistently low auction clearance rates all point to a buyer’s market, yet buyers are lacking the confidence to transact at the moment.”
Auction clearance rate falls
In perhaps more bad news for sellers, auction clearance rates eased last week — coming in at 52.4 per cent for the combined capital cities.
In Sydney last week, 683 properties were scheduled to be auctioned in Sydney. A total of 233 properties were sold via auction last week, according to REA data.
Nationally, Cotality’s data shows last week’s clearance rate was lower than the previous week’s 53.2 per cent.
The softer result followed a brief improvement through mid-August, when preliminary clearance rates rose above the 55 per cent mark over the weeks ending August 9 and August 16.
The lower preliminary clearance rate occurred alongside increased auction activity last week. A total of 1482 capital city homes went to auction, up 6.6 per cent from the previous week. Auction volumes are expected to continue rising as the weather improves, with approximately 1500 homes scheduled for the first week of spring and over 1600 the following week. This seasonal increase will test buyer demand, though activity is unlikely to match last year’s levels.
Auction volumes remain well below last year’s levels, down 32.3 per cent compared to the same week last year. This softer trend defined much of this winter’s auction market, with capital city volumes ending the season about 18 per cent lower than winter 2022.
The annual decline was concentrated in the largest markets, with winter volumes down approximately 25 per cent in Sydney, 19 per cent in Melbourne and 14 per cent in the ACT. In contrast, Perth, Adelaide and Brisbane saw increases of 20 per cent, 6.9 per cent and 0.4 per cent respectively.
In Melbourne, 653 homes went under the hammer, the highest of any capital city last week, up 9.9 per cent from the week prior, though almost 40 per cent fewer than a year ago. The preliminary clearance rate eased for a third week in a row to 54.9 per cent, down from 55.4 per cent the previous week, and that was below the recent peak of 60.8 per cent recorded over the week ending August 9.
Sydney’s preliminary clearance rate has remained above 55 per cent for four consecutive weeks, easing slightly to 56.3 per cent from 56.6 per cent. The city held 516 auctions, the second-highest among the capitals, up 8.2 per cent from the previous week but 36.3 per cent lower than a year ago.
Among the smaller capital cities, Brisbane again had the most volume, with 149 homes taken to auction, 1.3 per cent down on the previous week and 21.1 per cent up on the same week last year. The preliminary clearance rate fell to 31.5 per cent, down 8.9 percentage points from 40.4 per cent the previous week and the lowest early result since the first week of July.
Adelaide’s preliminary clearance rate was 50.8 per cent, a decrease of 4.1 percentage points from the previous week. Auction volumes in the city increased by 16.7 per cent from the previous week to 105, which is 1.9 per cent higher than a year ago.
The smaller markets held few auctions – in the ACT, 48 auctions took place, down by 27 per cent from the previous week and 24 per cent from a year ago, though its preliminary clearance rate edged up 30 basis points to 41.7 per cent. Perth held nine auctions and only two auctions took place in Tasmania.
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