TLDR
Australia's housing market recorded its steepest monthly fall in three and a half years in June 2026, with Cotality's national Home Value Index dropping 0.4% as Sydney and Melbourne led a sharp quarterly decline. The result confirms a two-speed market: while the big two capitals slid under the weight of a 4.35% cash rate and affordability ceilings, Adelaide, Perth and Brisbane continued to climb on migration and relative value. ANZ, Westpac IQ and CBA all cut their 2026 national price forecasts in response to the deteriorating conditions in the major cities. The divergence is now expected to run through to mid-2027, with Domain forecasting Sydney house prices to fall by as much as $122,000 over the year ahead while Perth gains up to 9%.
KEY TAKEAWAYS
What the June 2026 numbers actually show
Cotality's national Home Value Index fell 0.4% in June 2026, the largest single-month decline since December 2022.verifiedVerified Source: cotality.com[1] Combined capital-city values dropped 1.3% across the June quarter, with the worst falls concentrated in the two largest markets.[1]
Tim Lawless, Research Director at Cotality, said the result reflected a market moving faster than earlier readings had captured. "The downward revision reflects a market that is changing rapidly. Most regions have seen values revise lower over recent months, with the largest downgrades occurring in Perth and Brisbane, where the May index has been revised 88 and 53 basis points lower with the June update,"verifiedVerified Source: cotality.com Lawless said.[1]
Sydney recorded a quarterly fall of 3.2% and Melbourne 2.6%, while Adelaide, Perth and Brisbane held positive ground for the period.[1] That city-by-city split has since drawn responses from every major bank forecaster.
Why Sydney and Melbourne are sliding
The Reserve Bank's cash rate at 4.35% has compressed borrowing capacity in the two cities where median values sit highest, placing both markets under sustained downward pressure.[1] Buyers who qualified for loans at lower rates two years ago are either priced out entirely or constrained to smaller budgets, shrinking the pool of active purchasers.
Dr Nicola Powell, Chief Residential Economist at Domain, said the rate environment had driven a clear wedge between markets. "Higher interest rates are weighing heavily on Sydney and Melbourne, while more affordable segments and mid-tier cities are continuing to hold up,"verifiedVerified Source: domain.com.au Powell said.[2]
Domain's FY27 Forecast, published on 25 June 2026, put numbers to that pressure. Sydney house prices are projected to fall between $52,000 and $122,000 over the year to June 2027, and Melbourne between $42,000 and $84,000.[2] Affordability ceilings in both cities have left little buffer against rate-driven demand erosion.
Why Adelaide, Perth and Brisbane keep rising
Population growth and internal migration have underpinned record highs in Adelaide, Perth and Brisbane, where housing shortages and more accessible price points continue to attract buyers even as conditions soften elsewhere.[1] The relative value proposition in those cities remains intact compared with Sydney and Melbourne.
Domain forecast Perth to gain 5% to 9%, Brisbane 3% to 7% and Adelaide 4% to 8% over FY27.[2] Dr Nicola Powell said the housing market was no longer moving in lockstep, describing the current environment as one defined by fragmentation rather than a uniform national cycle.[2]
Adelaide's combination of strong interstate migration, a constrained supply pipeline and price points well below Sydney has sustained buyer competition through conditions that have dented demand elsewhere.
What the banks and forecasters expect through to June 2027
Westpac IQ forecast national dwelling price growth to finish calendar 2026 flat, with Sydney down 3% and Melbourne down 4%, against gains of 13% for Perth, 9% for Brisbane and 7% for Adelaide.[4] That spread between the weakest and strongest markets is one of the widest in the modern record.
ANZ Research revised its 2026 capital-city forecast down to 2.8% growth, from a prior estimate of 4.8%.[3] CBA trimmed its December 2026 national dwelling price growth forecast to 3%, from 5%, while holding its 2027 estimate steady at 3%.[5]
All three institutions published revised outlooks between April and May 2026, before the June Cotality data confirmed conditions had deteriorated faster than anticipated. Lawless said the scale of downward revisions to the Perth and Brisbane May index readings underscored how quickly the market had shifted in the second quarter.[1]
What it means for buyers, sellers and investors in each city
Sydney and Melbourne sellers are now operating in a market where buyer budgets have contracted materially under the 4.35% cash rate, and where forward forecasts from every major institution point to further price falls through FY27.[2] Domain's range implies Sydney median house values could drop by more than six figures before conditions stabilise.
Buyers in those two cities face the unusual dynamic of declining prices alongside still-tight borrowing conditions, meaning lower nominal values do not automatically translate into improved purchasing power. The affordability ceiling that drove the correction has not yet been lifted by rate relief.
In Adelaide, Perth and Brisbane, the picture is reversed. Demand from interstate migrants and owner-occupiers priced out of Sydney and Melbourne continues to compete against constrained supply, keeping upward pressure on values.[1] Investors weighing yield and capital growth prospects have increasingly directed attention toward those three markets as the major-city outlook has darkened.
Domain's FY27 forecasts, released on 25 June 2026, remain the most granular published guidance available for the year ahead, projecting Perth as the strongest-performing capital with gains of up to 9%.[2]
This article is general news and information, not financial, tax or investment advice. Property values and tax outcomes depend on your circumstances; seek licensed advice before acting.
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FREQUENTLY ASKED QUESTIONS
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Gavin O'Malley covers breaking news and sport for Bushletter. Fast and verb-led, he writes with a news-wire cadence and no patience for PR spin.
