Australian home values fell 1.2% in October, the seventh monthly decline in a row, according to Cotality's national home value index, leaving prices 6.7% below their March peak as a run of interest-rate increases squeezed what buyers can borrow.

The drop matters well beyond Australia. The slide is now feeding into how markets read the Reserve Bank of Australia, which meets on Nov. 3. Investors in Hong Kong, Singapore and across Asia who hold Australian bank shares, residential mortgage-backed securities or Australian dollars are watching whether falling prices will temper the central bank's appetite for further tightening.

At the national median, the peak-to-date drop is worth about A$63,400, Cotality said.

Brisbane and Perth overtake Sydney

The downturn, which started in Sydney and Melbourne, has moved firmly into the mid-sized capitals that led the last upswing. Brisbane values fell 2.0% in October and 6.1% over three months, the sharpest monthly fall of any capital. Perth dropped 1.7% in the month and 5.7% over the quarter, and Sydney fell 1.6% and 4.7%.

Tim Lawless, research director at Cotality, said the mid-sized capitals are “now well and truly in a correction.” He said most owners in those cities still sit on large equity cushions after years of gains. Cotality estimated that even a 20% fall in Perth would only take values back to roughly where they were in mid-2025.

The longer view is less forgiving in the two largest cities. Melbourne values are 7.3% lower than five years ago, Cotality said, and Sydney is 1.5% below its level of October 2021.

The pace is what stands out. Combined capital-city values have fallen 8.1% in seven months, which Cotality said is faster than any previous downturn over the past 40 years. In the first seven months of the 2022 to 2023 downturn, capital values fell 7.0%. The 2017 to 2019 correction, the largest peak-to-trough fall on record at 8.2%, had shaved only 1.2% off values over the same span.

Lawless attributed the weakness first to affordability and serviceability limits, then to rate rises, weak confidence and cost-of-living pressures. He also said the federal budget has added downward pressure since mid-May, Cotality said; IANS, the Indian news agency, reported that he cited the government's move to wind back tax concessions for property investors.

A buyer's market with few buyers

Activity has thinned alongside prices. Cotality's modeled estimates show sales over the three months to October were 23% lower than a year earlier and 18% below the five-year average, with Sydney down 30% and Brisbane down 29%.

Stock is building even though fewer owners are listing. Advertised supply across the capitals is the highest for this time of year since 2019, while new listings are almost 18% below average. Auction clearance rates across the combined capitals have held below 50%. Homes now take a median 39 days to sell, the longest since August 2020, and vendor discounts have widened to 4.7%, the most since May 2019.

Lawless said buyers are “noticeably absent” despite the stronger bargaining position, reflecting low confidence and tighter borrowing capacity.

Not every gauge shows the same depth. The realestate.com.au Home Price Report, compiled by PropTrack, recorded a smaller 0.3% national fall in October, leaving prices 4.3% below the same peak, according to Australian Broker. On PropTrack's numbers, Sydney is now 6.7% below its peak and has overtaken Melbourne, at 6.1%, as the weakest capital. Regional prices slipped just 0.1% and remain 3.1% higher than a year ago. Eleanor Creagh, a senior economist at realestate.com.au, said buyers have more negotiating power, but higher rates still cap what households can borrow, the trade publication reported.

Rate decision in focus

The Reserve Bank lifted its cash rate target by 0.25 percentage point at the end of September to 4.6%, its fourth increase this year and a 15-year high, IANS reported. All four major banks expect a fifth rise, to 4.85%, at the Nov. 3 meeting, according to the same report.

Those expectations firmed after core inflation rose to 3.7% in the September quarter, and the currency has held near 70 U.S. cents as traders priced in another move. Equifax data cited by Australian Broker showed mortgage demand down 19.2% from a year earlier in September, an early sign that credit is already tightening without further help from the central bank.

Cotality expects housing conditions to stay subdued for the rest of 2026 and into 2027, citing low confidence and the risk of more rate increases. The RBA statement is due at 2:30 p.m. Sydney time on Nov. 3, with all four major banks forecasting a cash rate of 4.85%.