Australia’s housing market is facing its largest price correction in living memory.
Cotality’s daily dwelling values index has plummeted by 7.6% since early April across the five major capital cities, led by Sydney, where values have fallen by 9.8%.
Values continue to fall at a furious pace, down 4.2% over the past quarter:
At this pace, dwelling values will be nearing a 10% decline from their peak by New Year’s Eve, with no end in sight.
Analysts are now furiously downgrading their house price forecasts.
HSBC chief economist Paul Bloxham recently forecast a 13% peak-to-trough decline for capital city dwelling values:
ANZ Bank also downgraded its forecasts last week, tipping a 13.5% peak-to-trough decline across the capital cities, with Sydney, Adelaide and Brisbane expected to fall by more than 15%.
“The combination of rising interest rates, global uncertainty and tax policy changes has dampened sentiment”, the ANZ economists wrote. “Clearance rates have been mostly below 50% since May 2026 (when Labor handed down its budget) and various indicators, such as sentiment and time on the market, suggest demand is weak”.
“While the Sydney and Melbourne markets have been the most affected so far, there are signs that some of the smaller capitals are starting to catch up”, ANZ wrote.
The weekend’s poor auction results have also added to market pessimism.
Cotality’s preliminary national auction clearance rate plunged to only 48.4%, down from last week’s 51.2% (revised to 47.6% on final numbers).
Source: Cotality
It follows a run of incredibly weak results, which has seen the national final auction clearance print below 50% for 19 of the past 21 weeks:
As illustrated above, October is on track to be the weakest auction market since the early pandemic lockdowns.
SQM Research managing director Louis Christopher didn’t mince words when he told The Weekend AFR that the market is “extraordinarily weak” and tipped a 20% price decline for Sydney.
“In Sydney, the market’s in deep trouble”, Christopher said. “I think the final clearance rate is going to be the weakest recorded this year”.
“You’ve got a lot of vendors out there who are not willing to budge yet. They’re not willing yet to meet the buyers. But the issue is that the buyers have taken a further step back, no doubt as a result of heightened concerns about yet another interest rate rise”.
“On this current tempo, we couldn’t rule out a 20% decline [in prices] from peak to trough in Sydney. It is that bad at this time”, he said.
Leading Sydney auctioneer Tom Panos was equally pessimistic in his Saturday afternoon market wrap:
Whereas Nerida Conisbee, chief economist at Ray White, the country’s largest residential real estate agency, said the market is “paralysed”.
“We’re seeing very low levels of open home attendance”, Conisbee said. “We’re also seeing very few sellers coming to market. The market just seems paralysed, more than anything”.
If anything, the outlook has worsened. The Reserve Bank is expected to hike rates further, with mortgage rates likely to surpass 7%.
Unemployment is also likely to rise sharply next year, putting more pressure on mortgage holders and house prices.
A New Zealand-style house price crash is looking increasingly likely for Australia.
