The Australian housing market has changed direction in 2026. After strong growth through 2025 and early 2026, home values have now fallen for six months in a row. At the same time, interest rates have risen four times this year. Here’s a plain-English summary of where the market stands in October 2026, and what it could mean for you.
The headline numbers
According to Cotality’s Home Value Index, released on 1 October 2026:
- National home values fell 1.1% in September, the sixth straight monthly fall.
- National values are now about 5.2% below their March 2026 peak.
- Over the past year, national values are roughly flat.
- Almost every capital city suburb (around 97%) recorded falls over the past three months.
City by city
Sydney
- Values fell 1.4% in September.
- Sydney values are about 8.6% below their February 2026 peak.
- Annual change: about -7.0%.
Sydney continues to lead the correction, with higher-priced homes falling the most.
Melbourne
- Down 0.7% in September, a milder fall than other large cities.
- Annual change: about -6.2%.
Brisbane
- Down 1.5% in September, the sharpest monthly fall among the capitals.
Perth and Darwin
- Perth (about +10.1%) and Darwin (about +11.9%) still show the strongest annual growth.
- Darwin was the only capital to rise in September.
Canberra
- Down a more modest 1.6% over the year.
What’s driving the change?
1. Rising interest rates
The RBA raised the cash rate four times in 2026, to 4.60% on 29 September, its highest level since 2011. Higher rates reduce borrowing power and buyer demand. The RBA has said more rises are possible.
2. New tax rules for investors
New laws passed in June 2026 limit negative gearing for established residential properties bought after 7:30pm on 12 May 2026, and replace the 50% CGT discount from 1 July 2027. Some analysts expect this to reduce investor demand for established homes.
3. APRA’s debt-to-income limit
Since February 2026, banks can only write 20% of new loans where debt is six or more times income. This limits highly leveraged lending.
4. Affordability
After years of strong growth, many buyers were already stretched.
What’s supporting the market?
- Low housing supply – new construction remains constrained
- A relatively resilient jobs market
- First home buyer support – the 5% Deposit Scheme with no income caps, Help to Buy, and NSW stamp duty exemptions
These factors may help cushion against a severe crash, though some forecasters expect further falls into 2027.
What it means for you
First home buyers
Softer prices and less competition may create opportunities, especially with the 5% Deposit Scheme and NSW stamp duty exemption up to $800,000. But higher rates mean careful budgeting is essential. Buy a home you’d be happy to hold for the long term.
Home owners
Your equity may have fallen if you bought recently. If you’re planning to refinance, check your property’s likely value, as your LVR may be higher than you think. With four rate rises, a home loan review is worthwhile.
Upgraders
A falling market can work in your favour if the home you’re buying has fallen more in dollar terms than the one you’re selling. Be careful with bridging finance and conservative with your sale price expectations.
Investors
The new tax rules mean cash flow matters more. New builds keep negative gearing and are exempt from APRA’s debt-to-income limit. Talk to your accountant before buying.
Our view
Markets move in cycles. Nobody can predict the bottom. The best decisions come from focusing on what you can control: your budget, your loan, your buffer and buying the right property for your needs.
Questions to ask yourself before acting
- How long do I plan to stay in this property?
- Can I comfortably afford repayments if rates rise again?
- Do I have a buffer for repairs and emergencies?
- Have I checked my borrowing power at today’s rates?
Answering these honestly matters more than trying to time the market.
Frequently asked questions
Will prices keep falling?
Some forecasters expect further falls into 2027 if rates stay high. Others expect low supply to limit declines. No one knows for sure.
Is now a good time to buy?
It depends on your finances and goals. Softer markets can offer opportunities, but make sure you can afford the repayments if rates rise further.
How often will these updates be published?
We’ll keep sharing updates as the market changes. Check back regularly or follow us on social media.
Should I wait for prices to fall further?
Trying to pick the bottom is hard. Focus on your own readiness and long-term plans instead.
Talk to Awesome Lending Solutions
Every situation is different, and the right loan depends on your goals, income and timing. At Awesome Lending Solutions, we compare a wide panel of lenders and explain your options in plain English, with no pressure. Call us on 02 7904 9560 or visit awesomelendingsolutions.com.au to book a chat.
This article is general information only. It does not consider your objectives, financial situation or needs, and it is not financial, tax or legal advice. Scheme rules, interest rates and laws were current as at October 2026 and can change. Speak with a licensed professional before making any decision. Albert Waldron is a Credit Representative (CR 407514) of AFG’s Australian Credit Licence 389087.