Australia’s housing market slowdown deepens as July values record largest fall since 2022

Australia’s housing market downturn is accelerating, with home values falling 0.7 per cent in July 2026 — the largest monthly decline recorded since December 2022 — according to the latest Cotality Home Value Index.

The data paints a picture of a broad-based slowdown, with the rate of decline intensifying across most capital cities and regions. Over the three months to July 2026, values dropped 1.9 per cent, also the steepest quarterly fall since December 2022.

Herron Todd White Chief Economist Cameron Kusher said the monthly and quarterly data together signal a market under significant pressure.

“We should be cautious about reading too much into monthly movements, but the monthly and quarterly changes are pointing to a significant market slowdown,” Kusher said.

“The rate of decline is accelerating in those markets where values are already falling, while the slowdown in growth in markets where values are still rising is evident right across the country. It seems unlikely that anything will change these conditions in the short term.”

A nationwide shift

The slowdown is no longer confined to a handful of underperforming markets. On an annual basis, values are now lower than a year ago in Sydney and Melbourne — Australia’s two largest property markets — with the rest of the country showing signs of weakening momentum.

Only Hobart and regional Tasmania have yet to see the annual rate of growth begin to slow, according to Kusher, suggesting the softening is approaching truly national in scope.

The data also reveals a distinct stratification within the market. Upper-quartile home values have fallen 3.2 per cent over the past three months, according to the Cotality Stratified Hedonic Index, while the lowest quartile has recorded a modest 0.3 per cent gain over the same period.

“The market is slowing across the board, with the most expensive properties experiencing the largest slowdown,” Kusher said. “In both instances, however, the pace of change is accelerating and market momentum is weakening.”

Why this downturn is different

While Australia has weathered property downturns before, Kusher pointed to a key structural difference that could prolong the current correction — the absence of any near-term catalyst for recovery.

“Unlike other recent downturns, the big difference this time is that the labour market remains tight and inflation is still too high,” he said. “It appears that interest rate cuts remain some way off, and reductions in rates are usually a trigger for slowing or stopping declines in home values.”

That observation carries significant weight for investors and owner-occupiers alike. In previous downturns — most notably the 2022 rate-rise cycle — eventual RBA intervention provided a floor for prices. With the central bank’s hands tied by persistent inflation, that floor is not yet in sight.

Vendors caught between reluctance and reality

One of the more telling signals in the current data concerns vendor behaviour. Cotality is reporting that new listings are running below seasonal norms — a dynamic Kusher interprets as reluctance rather than confidence.

“This may point to vendors being reluctant to list in current conditions,” he said. “Whether this continues into spring will be telling, as it would suggest many people do not have to sell and can postpone bringing their property to market.”

The spring selling season — traditionally the busiest period for listings and transactions — will serve as a critical test of market depth. Even if supply remains constrained, Kusher warned that a fundamental mismatch between vendor price expectations and buyer appetite is already evident in the data.

Auction clearance rates are running at very low levels, time on market is extending, and price discounting among properties that do transact is increasing. These are the measurable symptoms of a market where buyers hold the leverage.

“With the market expected to continue weakening, I expect both the time it takes to sell a property and the magnitude of price discounting to increase,” Kusher said.