(Lucy Slade’s post from the AUSTRALIAN FINANCIAL REVIEW on 22 June 2026.)
‘Downturn
is deepening’: Sydney house prices fall faster as clearances crash. Sydney
house prices have fallen 1.1 per cent in the last four weeks, with the pace of
the decline picking up as clearance rates crash close to their lowest on
record, according to Cotality.
The
correction, which could extend for months longer, hit the Sydney and Melbourne
markets first but is already being felt in Perth, Brisbane and Adelaide where a
previously buoyant market is also showing signs of easing. Sydney and
Melbourne’s home values could fall by 8 per cent by November.
“In Sydney and Melbourne, it does look like this downturn is deepening as we move into winter,” said Tim Lawless, research director at Cotality, a property data provider. Cotality’s rolling home value index shows prices have declined by 1.1 per cent in Sydney in the last four weeks and are now sliding faster than the 0.9 per cent fall recorded over May.
In
Melbourne, prices have fallen 0.8 per cent in the last four weeks, the same
amount of decline as in May. While prices are still rising in Perth, Brisbane
and Adelaide – up 0.9 per cent, 0.5 per cent and 0.3 per cent respectively over
the past four weeks – the pace of that growth is clearly moderating, Lawless
said. “We’re definitely seeing the growth trends moderating in those mid-sized
capitals, and probably flattening out, if not even some level of decline.”
High
interest rates, coupled with the blow to investor sentiment from Labor’s tax
shake-up, are driving the downturn. Weekly auction clearance rates have slowed
even further since the federal budget was announced last month.
Last
week’s final clearance rate is likely to land around 41 per cent, only a notch
above the lowest figure Cotality has ever seen since its records began in 2008:
40 per cent in the midst of the last downturn at the end of 2018.
The
auction clearance rate is unlikely to fall much further than 40 per cent, a
natural threshold at which more vendors turn to private sales – since auctions
are most effective when there are multiple bidders for a property – or sellers
will withdraw from the market altogether.
“[The
clearance rate] is a clear indicator that the market will be weakening from
here. When clearances are slow, it generally means that housing values are
going to be falling, and they are,” Lawless said.
The
clearance rate likely needs to rise back to the decade average of about 65 per
cent before property prices in the most auction-sensitive markets of Sydney and
Melbourne see prices begin to increase again, he said.
Prices to fall 8pc by November
The
correction could run until November at least, according to analysts at
Barrenjoey, who revised their house price forecasts significantly after the
federal budget. Previously, Barrenjoey was forecasting flat or 1 per cent
annual growth in Sydney and Melbourne. Now the firm predicts home prices in the
two major capitals to slump by 7 or 8 per cent over the 12 months to November.
“The
length of the decline probably will last around the 11-month mark, so [the
decline] having started in November last year, will continue for most of this
year with the declines clearly being more front-loaded, particularly around the
next two or three months,” Barrenjoey head of economic forecasts Johnathan
McMenamin said. “These levels are around those cycle lows that you’ve seen in
the past.”
Barrenjoey
is among a small group of economists who expect another rate rise this year. It
is anticipating a rate rise in August or November, which would send the cash
rate above the previous post-pandemic high of 4.35 per cent.
“We
say that about 60 odd per cent of the decline that we’re going to see in house
prices is going to have to do with interest rates, and then 40 per cent is to
do with the changes in the budget, but also the negative sentiment effect that
we’ve seen,” he said.
Nationally,
McMenamin expects house prices to track flat by the end of the year as the
supply and demand mismatch is greater in the mid-sized capitals, supporting
prices somewhat in Perth, Brisbane and Adelaide and offsetting declines in
Sydney and Melbourne.
Ray
White chief economist Nerida Conisbee said property prices would continue to
fall as the effects of the budget work their way into the market. She said real
estate agents can’t control property prices but they can control whether to
take a property to auction.
“An
auction with no bidders is a very difficult thing to run. We are seeing a lot
more agents switch to private treaty because they’re either not confident in
the auction process or they’re not getting enough interest in the property,”
Conisbee said.
