Perth, Brisbane now the only capitals in positive territory

The enduring property boom that has seen property prices rise 27.1 per cent over five years and 65.6 per cent in ten years is over - at least for now.

The slowdown of the past few months has accelerated, with all capital cities retreating in June.

Only Perth (0.7 per cent) and Brisbane (0.3 per cent), remain in price growth territory and both of those have slowed rapidly compared to the previous month (from 1.5 and 0.9 per cent respectively).

Regional Australia is also clinging to monthly gains, with prices up 0.3 per cent but also in retreat compared to the previous month’s 0.6 per cent.

Property prices nationally are now firmly in decline, led by sharp falls in Melbourne and Sydney.

The downward revision reflects a market that is changing rapidly, according to Cotality’s Research Director, Tim Lawless.

“Weaker conditions through the second quarter of the year are attributable to an array of downside factors,” Mr Lawless said.

“Even before interest rates rose by 75 basis points, we were seeing affordability hurdles weighing on buyer demand.

“Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions.”

Property data provider PropTrack stated Wednesday (1 July) that national home prices have fallen for the third month running, declining by 0.3 per cent in June. Despite the monthly drop, they remain 5.8 per cent higher year-on-year.

Citing these findings, Anne Flaherty, Senior Economist, REA Group, said the nation-wide softening in home prices came as higher interest rates and cost-of-living pressures continue to weigh on purchasing power, and added that the Budget may have also contributed to more cautious decision making among both owner-occupying buyers and investors.

“The strongest performing parts of the market continue to be those offering the greatest affordability, with regional markets outperforming capitals over both the month and the year.

“Similarly, units have recorded smaller declines over the month compared to houses, and have seen stronger growth over the year.”

Looking ahead, Ms Flaherty said affordability is likely to remain a key driver of market performance, with the share of buyers looking to purchase in more affordable areas, such as regional markets, expected to increase.

“As yet, the full impact of the Budget on investor demand remains to be seen.

“Overall, conditions appear to have improved for first home buyers, who will benefit from lower home prices and less investor competition in 2026.”

All signs point to buyers’ market

The balance of power is also shifting towards buyers.

Auction activity suggests sellers are finding conditions increasingly challenging, with Cotality reporting combined capital city clearance rates have remained below 50 per cent since late May. By the end of June, clearance rates had slipped into the low-40 per cent range, signalling weaker buyer competition.

Sales volumes are also slowing. Cotality estimates capital city home sales over the three months to June were 16.2 per cent lower than the same period a year earlier and 14.5 per cent below the five-year average.

At the same time, buyers have considerably more choice. The number of properties advertised for sale across the capital cities is now almost 11 per cent higher than a year ago and broadly in line with the historical five-year average.

Mr Lawless said the combination of softer demand and higher stock levels was changing market dynamics.

“Such low clearance rates indicate a mismatch between buyer and seller pricing expectations. Buyers now have more stock to choose from and less urgency in their decision-making,” Mr Lawless said on Wednesday.

Rather than a surge in new listings, Mr Lawless said the larger volume of properties on the market reflected homes taking longer to sell.

“Higher listings aren’t due to a pick-up in the flow of new listings; it’s a symptom of less demand in the market, which has led to an accumulation of advertised stock.”

The picture is more resilient outside the capitals, although momentum is easing there as well.

Regional dwelling values rose 0.3 per cent during June and were 1.1 per cent higher over the quarter, outperforming the capital cities overall, however, performance varied considerably between regions.

Regional Victoria recorded a 0.1 per cent decline for the month, regional New South Wales was unchanged, while regional Western Australia remained the standout performer with values climbing 3.7 per cent over the June quarter.

A property market pause, not a collapse

While buyer sentiment has deteriorated, the outlook for the housing market is not universally pessimistic.

Home building activity remains more resilient than the recent price data might suggest. According to the latest Australian Bureau of Statistics figures, approvals for detached houses rose 3.0 per cent in May to their highest monthly level since September 2021.

Housing Industry Association Chief Economist, Tim Reardon, said the figures reflected momentum that had been building throughout 2025 before confidence was shaken by rising interest rates and the Federal Budget.

“New headwinds, including rising interest rates, fuel costs and international turmoil, have started to weigh on confidence and are already suppressing dwelling price growth in a number of markets,” Mr Reardon said.

Despite the recent slowdown, Mr Reardon believes the underlying supply-demand imbalance has not disappeared.

“There is a narrow window of opportunity to get into the housing market, as home prices have fallen due to the uncertainty created by the Budget. At the same time, we are not building enough homes to meet growth in demand.

“We expect house price growth to return when the noise from the Budget and interest rate adjustments clears.”

Oxford Economics Australia Lead Economist Maree Kilroy said the approvals data also pointed to underlying resilience, despite headline figures showing a third consecutive monthly decline.

Private house approvals continued to trend higher, reaching their strongest level since late 2021, while a substantial pipeline of approved higher-density projects is expected to support future construction activity. Oxford Economics forecasts dwelling approvals will increase by around 5 per cent during 2026, led by detached housing.

Taken together, the data paints a picture of a market moving into a new phase rather than one facing a repeat of previous housing crashes.

Prices are falling, buyers have regained negotiating power and investor sentiment has weakened. Yet Australia’s long-standing undersupply of housing, solid employment and continued population growth continue to underpin demand.

Property outlook sparks political row

The worsening outlook for housing has sparked a political battle over whether falling prices should be welcomed or feared.

Prime Minister Anthony Albanese argued softer prices would improve opportunities for aspiring homeowners by reducing competition from investors following the Federal Budget’s changes to negative gearing and capital gains tax concessions.

Speaking to reporters on Wednesday, Mr Albanese said first home buyers were now competing on a more level playing field at auctions because fewer investors were bidding for established homes.

The comments came as Cotality forecast Australian dwelling values could fall by as much as 8 per cent from peak to trough by the middle of next year, potentially making it one of the most significant housing corrections since the early 1980s.

Such a decline would substantially exceed Treasury’s earlier modelling, which suggested the Budget’s property tax reforms would slow price growth by around 2 per cent over several years.

The Government’s housing policies also came under attack from the Opposition, with Shadow Housing Minister Michaelia Cash arguing weaker investor demand would ultimately worsen rental shortages and undermine confidence across the property market.

During a televised debate with Housing Minister Clare O’Neil, Senator Cash accused the Government of stalling the housing market by discouraging private investment at a time when new housing supply was already struggling to keep pace with demand.

She argued Australia could not solve its housing affordability challenges without significantly increasing the number of homes being built.