Is the Property Market About to Crash?

The latest Cotality data points to a serious slowdown in our two biggest cities. Over the June quarter, Sydney dwelling values fell 3.2 per cent and Melbourne fell 2.6 per cent. Sydney now sits about 3.7 per cent below its January peak, and Melbourne about 4 per cent below its 2022 high, a peak it has never quite managed to reclaim. Nationally, values slipped 0.4 per cent in June, the third monthly fall in a row and the largest since December 2022.

Annualise those quarterly falls, and you get numbers that look alarming: Sydney running near 13 per cent Melbourne near 11 per cent. Before anyone reaches for the panic button, remember that annualising a single soft quarter is like judging the whole cricket season on one bad over.

So let’s put those figures into an historical context. Across Cotality's 46 years of records, the three largest national downturns (1982 to 1983, 2017 to 2019 and 2022 to 2023) all bottomed out around 8 to 10 per cent, and each was followed by a recovery. Domain's twelve-month forecast is quite mild: Sydney down 3 to 7 per cent and Melbourne down 4 to 8 per cent over the year to June 2027. These figures point to a correction, not a collapse.

Buyers, meanwhile, are sitting on the sidelines like it is a Sunday picnic. Listings are slowly building with advertised stock is up about 7.7 per cent on a year ago, which gives buyers something they have not had in years: time and choice. Cotality data is saying vendor discounting has widened to around 3.6 per cent, however on the ground in parts of Sydney and Melbourne there are easily 5 to 10 per cent discounts on offer (it takes time for official data to catch up). For a buyer with a clear plan and finance approved, the pressure has genuinely come off.

A multi-speed nation

Step outside Sydney and Melbourne and the story changes. This is a multi-speed market, and the mid-sized capitals are still out in front, even as their pace cools from last year's sprint to a comfortable jog.

The latest Domain House Price Report, and 12-month price forecast to June 2027 is outlined below.

Source: Domain House Price Report July 2026

Note: Cotality and Domain measure the market slightly differently, so their numbers do not match exactly -
but both are telling the same trend.

What strikes me in the table above is that Sydney prices are 66 per cent higher than Melbourne! The gap has never been so great and indicates that Melbourne represents an excellent below market value buy in the property cycle right now (and even overtaken by Adelaide and Brisbane).

What the data is not telling you

Two things the headline numbers miss.

Firstly, sentiment has already pulled prices lower than the lagging Cotality figures suggest. By the time an index confirms a move, the market has usually already made it.

Secondly, buyers are worried and confused about timing. Most think there is further to fall, so they wait for the bottom. Nobody rings a bell at the bottom. There is no red-light special, no siren that sounds while the crowd rushes back in. The bottom is only ever visible in the rear-view mirror.

Trying to time your entry into the market is like an Olympic diver twisting and flipping through the air, chasing a perfect ten and hoping to slip splash-free into the water! Glorious when it works.

Most of us just belly-flop. (I had to use a sporting analogy in light of the Commonwealth Games underway.)

The smart money is already moving

While nervous buyers freeze, experienced buyers are leaning in. Mortgage aggregator AFG reports that upgraders have jumped to 44 per cent of all home loans lodged, a level seen only twice before, in 2018 and in 2022. Both, funnily enough, were near the bottom of their cycles.

And demand has not fallen off a cliff. AFG just posted its biggest June quarter on record, more than $28 billion in home loans. Buyers have paused to think, not packed up and gone home. Those are two very different reactions to market conditions.

Is waiting worth it?

The case for waiting: If your finances are fully stretched, or the budget changes have cut your borrowing capacity, forcing a purchase this year is worse than pausing to rebuild your position first. If Sydney or Melbourne has a little further to fall, a patient buyer might shave a few per cent off the entry price. And the one genuine wildcard is jobs: if unemployment spikes from here, that would change the picture, so keep an eye on it.

The case against waiting: You cannot see the bottom until it has passed, and by then the competition is back in the room. There is a slight chance of one more rate rise if inflation remains too high, then a turn, with cuts likely from the second half of 2027, and demand tends to snap back faster than prices fell. If you are renting while you wait, rents are climbing close to 6 to 8 per cent, so you are paying a holding cost either way. And chasing the final 3 per cent discount usually means missing the motivated vendor and the quiet off-market deal that never reaches a portal. I’d much rather be bidding now when there’s hardly anyone around at auction, than wait 6 -9 months when there’s another 6 bidders working against me.

What the budget actually did

The budget tried to “fix” the housing problem and intergenerational equity by banning negative gearing and removing the 50% CGT and encouraging investors to buy new properties to increase supply. Sounds good in theory – but the reality is vastly different and, in my view, will create “generational inequity” and make it harder for younger buyers to get ahead and build wealth. The tax changes do not add a single dwelling to the pipeline. They redirect who buys what. They do nothing to fix supply.

Economist Christopher Joye (Coolabah Capital Investments) claims that “negatively geared investors represent one-fifth of new lending, the tax grab has whacked the market with the equivalent of a half of 1 percentage point of RBA tightening, or two standard moves.” Joye estimates this should lower prices by about 3 to 5 per cent over a year. This is not a crash.

Observations of past corrections

Over the past 30 years in property, I have watched buyer behaviour through many cycles, and the pattern rarely changes. Buyers wait, procrastinate, drown in uncertainty, and end up doing nothing at all. Then six to twelve months later comes the familiar sigh: "I wish I'd bought when the market was softer."

Markets turn upward just as quickly as they turn down, and sentiment can lift on a single headline. The fundamentals have not changed because of a budget tweak. We remain structurally undersupplied across this country, and that one force, more than any other, keeps nudging this market onward and upward over time.

The people who look back on 2026 with regret will not be the ones who bought. They will be the ones who waited for a bell that never rang.

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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.