Key facts
- House prices are falling in every Australian capital city for the first time in 15 years.
- Sydney prices are at a two-year low.
- Perth recorded the sharpest drop, with house prices falling a record 4.7%.
- Higher interest rates, cost-of-living pressures, and changes to housing investment tax policy are driving reductions.
- Buyers have increased opportunities due to high supply levels in many capital cities.
- Morgan Stanley economists predict the market to bottom out in the second half of 2027, with a potential downturn of up to 15%.
House prices are declining across all Australian capital cities for the first time in 15 years, according to Domain's September Quarter 2026 House Price Report. Sydney's median house price has fallen 4.7% in the quarter to $1.66 million, reaching a two-year low. Melbourne's median price dropped 3.3% to $1.014 million, its largest quarterly fall in four years. Perth experienced a record 4.7% decrease, with Brisbane and Adelaide also seeing their steepest quarterly falls on record. Domain's chief residential economist, Nicola Powell, noted that homes are taking longer to sell, allowing for greater negotiation and more realistic price expectations from sellers. She attributed the reductions to higher interest rates, persistent cost-of-living pressures, and changes to housing investment tax policy, which have weakened buyer sentiment. Powell anticipates that Melbourne's median house price could fall below $1 million by year-end. Reduced borrowing capacity is also impacting sales, creating a buyer's market with high levels of supply in many cities. Morgan Stanley economists forecast the market to bottom out in the second half of 2027, with a potential decline of up to 15% from peak to trough.