While the nation was picking its sweep, the Reserve Bank picked our pockets. On Melbourne Cup Day, the RBA lifted the cash rate by 0.25 percentage points to 4.85%, the fifth rise this year and the highest cash rate since 2008.

For anyone who borrowed in early 2026, the cash rate has now climbed 1.25 percentage points since January. On a $1 million loan, that is roughly $800 a month more in repayments. Little wonder buyers are sitting on their hands.

In this update I unpack what the latest Domain and Cotality figures tell us, why buyers have gone quiet, how much further prices may fall, and why I believe this is shaping as one of the best buying windows in a decade.

Where prices sit today

House prices fell in every capital city in the September quarter, the first time that has happened in 15 years and only the second time on record, according to the Domain House Price Report. Combined capital house prices dropped 4.7% for the quarter, with units down a gentler 3.5%.

Source: Domain House Price Report, September quarter 2026.

A few numbers jump off the page:

• Sydney houses are down 7.9% ($143,062) from their December 2025 peak, and their 5.8% fall over the year is the steepest of any capital.

• Perth recorded the largest quarterly decline on record for both houses and units. When the hottest market cools this fast, it tells you how quickly sentiment can turn.

• Brisbane and Adelaide have snapped growth streaks of 14 and 13 quarters respectively.

• Melbourne houses and units fell 3.3% and 3.7% respectively.

Cotality's latest figures show the slide continued into October. National values fell 1.2%, the seventh monthly fall in a row, leaving them 6.7% (about $63,400) below the March peak. Capital city values have dropped 8.1% in seven months, the fastest pace in around 40 years (Cotality Oct 2026).

For buyers, the selling conditions behind those numbers matter more than the headline:

• Auction clearance rates are consistently below 50% across the combined capitals. Last week's preliminary result was 47.2%, the lowest since April 2020.

• Median time on market has stretched to 39 days, the longest since August 2020.

• Average vendor discounting is 4.7%, the deepest since May 2019.

• Capital city listings are at their highest for this time of year since 2019, yet sales volumes are 23% lower than a year ago (30% lower in Sydney).

We are seeing a growing number of auction campaigns quietly converting to private treaty. Translation: more choice, less competition and vendors who are already discounting. Negotiating power has shifted firmly to the buyer's side of the table.

Why buyers are sitting on their hands

Buyers are not short of options. They are short of confidence. Three pressures are doing the damage.

1. Interest rates. The cash rate started 2026 at 3.60%. After rises in February, March, May, September and now November, it sits at 4.85%. Every rise trims borrowing capacity, so the same buyer qualifies for less house than they did in January.

2. Cost of living. Fuel, insurance, energy and groceries have all taken a bite. Westpac economist Matthew Hassan noted the upside risks to inflation flagged earlier in the year are now materialising, which is precisely why the RBA kept tightening.

3. Consumer sentiment. The Westpac-Melbourne Institute Consumer Sentiment Index fell 4.7% to 80.4 in October, its second straight monthly fall. Any reading below 100 means pessimists outnumber optimists, and the long-run average sits around 100. The sub-index for family finances compared with a year ago slumped to 66.9. Households feel poorer, and they are acting like it.

The psychology of waiting

When prices are falling, the instinct is to wait it out. Nobody wants to be the person who bought in October and watched their neighbour pay $80,000 less in March. Behavioural economists call this loss aversion: the pain of a loss is felt roughly twice as strongly as the pleasure of an equivalent gain.

The trouble is that waiting feels safe but it is not free. While buyers wait, they are paying rent, losing time in the market, and competing with everyone else who waited for the same 'perfect' moment. History tells us the crowd rarely times the bottom. It usually piles back in once prices are already rising.

How much further to fall?

AMP chief economist Shane Oliver now expects national prices to fall 10% to 15% from peak to trough, with a bottom around the middle of 2027. That is a big step up from the 6% he was tipping in July.

Let's put that 15% against Sydney houses. Domain's peak in December 2025 was roughly $1.80 million. A 15% fall takes the median to about $1.53 million. We are already 7.9% down, so that scenario implies another 7 to 8%, or roughly $130,000, still to come.

The case for deeper falls

• Rates are still rising, and ANZ has flagged a possible further hike to 5.10% in December or February.

• Investor tax changes have pulled a large buyer group out of the market at the same time.

• Household debt is far higher than when rates were last at these levels, so each rise hurts more.
  
  

The case that AMP is too gloomy

• Most forecasters sit lower: CBA tips 9%, Macquarie about 10%, Westpac just over 10%, HSBC 13% and ANZ 13.5%.

• CBA and NAB both see a 4.85% cash rate as the peak of this cycle.

• Distressed selling remains contained, according to Domain, and Cotality reports fresh listings are still about 18% below average. There is no flood of forced sellers.

• Housing supply remains well short of population needs, which puts a floor under prices over time.

My view? Sydney houses probably have another 3% to 6% to give before they find a floor. Forecasts at the extremes make headlines. Reality usually lands somewhere in the middle.

Some perspective: zoom out ten years

Headlines love a quarterly fall. Wealth is built over decades. Here is how Domain's median house prices compare with September 2016.

Sources: Domain House Price Reports, September quarter 2016 and September quarter 2026. Propertybuyer calculations.

Even after this year's falls, a Sydney house is worth almost $600,000 more than it was a decade ago. A 10% correction would give back about three years of that growth.

Prices are already back to 2021

Here is the stat I would pin to the fridge. Cotality reports that Sydney dwelling values (houses and units combined) are now 1.5% below where they were in October 2021. Melbourne values are 7.3% lower than five years ago.

In other words, today's buyers can purchase at roughly 2021 prices, with five years of rising incomes, rents and building costs locked in since. And in Perth, even a 20% fall from the peak would only take values back to around mid-2025 levels.

Downturns are shorter than upswings

Domain's analysis of Australia's eight completed housing cycles since 1995 is a useful reality check:

• The average upswing delivered 32.3% growth over about 2.8 years.

• The average downturn cost 2.9% over about eight months.

• The worst, in 2016 to 2019, was an 8.5% fall over 18 months.

• Every one of those downturns was followed by a recovery to new highs.

To be fair, this downturn is already deeper than the historical average, so I would not lean on the 'eight months' figure. But the pattern holds: the market spends far more time going up than going down.

Demand is being wound up like a spring

While buyers wait, the reasons people buy property have not gone anywhere. Families still grow. Migrants still arrive. Renters still want security. Investors still want yield and capital growth.

Each month of hesitation adds to a queue of pent-up buyers. When confidence returns, they tend to come back together, and that is when competition, bidding wars and FOMO return with them.

What does this mean for buyers?

Nobody rings a bell at the bottom of the market. But there are signals worth watching, and the smart money moves before all of them are flashing green.

Signals the floor is forming

1. Rates top out. Two of the big four already see 4.85% as the peak. Once the RBA holds for a couple of meetings and the market stops pricing in hikes, buyers will exhale.

2. Inflation comes back under control. Watch the quarterly CPI. A trimmed mean heading back into the RBA's 2% to 3% target band is the green light for rate relief in 2027.

3. Auction clearance rates stabilise. When clearance rates stop falling and days on market start shortening, momentum is turning.

4. Sentiment lifts off the floor. A sustained bounce in the Westpac index usually precedes a return of buyers.

By the time all four are obvious, prices will already be moving. That is the paradox: the best buying conditions always feel the most uncomfortable.

Why conditions are ripe for patient buyers

Right now buyers have something they have not had for years: time and leverage. Less competition, more stock, motivated vendors and agents who are happy to take your call.

In a soft market we are often negotiating 5% to 10% below where the same property would have sold 12 months ago, and in some cases up to 15%. That is not wishful thinking. Values are already 6% to 8% below their peak, and the average vendor is now discounting 4.7% off their asking price, the most since 2019. Combine a falling market with a vendor who needs to sell and a skilled negotiator in your corner, and the gap opens up quickly.

That is a long-term discount, if you buy well. The caveat matters. A discount on a poor property is still a poor property. This is a market for quality: the right location, scarcity, land value and a structure that will be in demand when the spring uncoils.

If you are thinking about buying, here is what I would do now:

• Get your finance pre-approved. Banks already test you at 3 percentage points above the loan rate, so also check you are comfortable if rates rise a further 1 to 2 points.

• Be clear on your non-negotiables so you can move decisively when the right property appears.

• Use the soft market to negotiate on terms as well as price: longer settlements, subject-to-finance clauses, pre-auction offers.

• Look hardest at properties that have been sitting for 60+ days. That is where motivated vendors live.

As I often say, you make your money when you buy, not when you sell. If you want an experienced set of eyes on your next purchase, call the Propertybuyer team on 1300 655 615.

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This update is general information only and does not take your personal circumstances into account. It is not financial, tax or investment advice. Please seek your own professional advice before making any property decision.