What the data shows
House prices fell 4.7% in the quarter, the steepest quarterly fall on record. Prices fell in every capital city, the first time in 15 years and only the second time on record.
Perth recorded the sharpest fall, at 7.4%. Combined capital city house prices fell to $1,226,566.
Sydney and Melbourne recorded their biggest quarterly house price falls in four years, down 4.7% and 3.3% respectively. Unit prices fell 3.5%, the second consecutive quarter that both houses and units declined.
Source: Domain, September quarter 2026.
The top end is falling fastest
The falls aren't even. Australia's most valuable homes are falling the most, while lower-value homes have been relatively stable over the three months to September. In Sydney, the most valuable quarter of homes fell more than twice as much as the least valuable quarter.
Economist Cameron Kusher says that reflects fewer buyers and higher borrowing costs, because expensive homes typically rose the most in recent years.
Why prices are falling
Cotality's Gerard Burg described it as a demand-led downturn, caused by higher rates, lower affordability and cost-of-living pressures.
The Budget's tax changes contributed, but they weren't the only cause. Prices had already started falling before the May Budget.
Activity has also dropped sharply. Auction volumes have roughly halved from last year, with 1,423 auctions across the capitals last week.
Homes are taking longer to sell, there's more room to negotiate, and sellers are having to be more realistic about price expectations. The balance of power has shifted towards buyers. — Nicola Powell, Domain
What it means for investors and business buyers
- Opportunity: investors with secure funding now have more choice and more room to negotiate.
- Risk: values may keep falling. Kusher expects the downturn to last longer than many people expect, probably until rate cuts look likely. Investors should be comfortable holding the asset through further falls, with cash flow that works at today's rents and rates.
- Finance: expect conservative valuations and base your plans on today's prices. See Why your valuation came in low, and what you can do about it.
What it means for sellers of property assets
- Set realistic price expectations based on current comparable sales.
- Allow longer selling periods, especially for higher-value properties.
- If a sale is funding another purchase or repaying a facility, plan for delays. See Sell first or buy first?
What it means for property-backed borrowers
- Refinancing and equity release: lower valuations mean less available equity. Review your plans against current values.
- Higher-value security: if your facility is secured by a high-value property, expect valuers to be especially cautious.
- Construction and development: falling end values reduce margins, so feasibility studies need current pricing.
The Funding Door view
A buyer's market rewards preparation. Well-funded investors can negotiate good outcomes, while sellers and borrowers who rely on yesterday's prices risk being caught short. The key is a funding structure that works at today's values, with room to spare.
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