Australian house prices drop for sixth straight month and more falls expected

Australian house prices fell for a sixth straight month in September, and experts say the property market could experience falls of up to 15 per cent in the coming months off the back of higher interest rates and cuts to housing tax breaks.

Cotality's Home Value Index fell 1.1 per cent in September, taking cumulative declines to 5.2 per cent below March's peak.

Brisbane saw the sharpest monthly drop among capitals (-1.5 per cent), while Sydney fell 1.4 per cent and Melbourne fell 0.7 per cent.

Darwin (+0.4 per cent) was the only housing market to avoid a fall.

Across the capitals, 97 per cent of suburbs recorded value declines over the past three months, which Cotality's research director Tim Lawless said showed the broad-based scope of the negative housing cycle.

Mr Lawless predicted housing values would continue falling into 2027 because of higher rates.

"I think a 10 per cent to 15 per cent drop is probably a fairly reasonable estimate at the moment,"

he said.

"It really depends on how far do interest rates rise and when do we actually start to see the RBA moving into a more dovish period where rate cuts might be on the agenda."

Developer says more builders will go under

Mr Lawless is not the only expert predicting house price falls.

Queensland developer Soheil Abedian has built tens of thousands of homes and is behind luxury developments on the Gold Coast, including Australia's tallest building, Q1, and the former Palazzo Versace resort.

He said the Middle East war, the federal government's budget changes to negative gearing and the capital gains tax, plus interest rate hikes, would continue to dent property prices and could lead to more builders going under.

He said if interest rates continued to rise over the next six to 12 months, the construction sector would see more bankruptcies.

"You cannot do any development in Australia that is not bankable," Mr Abedian told ABC News in an exclusive interview.

"If [there is a] 10–15 per cent reduction we have in the value of the homes, the number of the bankruptcies that we have witnessed in the last 12 months, that increases rapidly and will damage the industry more."

Mr Abedian said construction costs were getting exorbitant and he partly blamed unions for demanding wages that were too high.

"We built, almost 25 years ago, Q1 — an 80-storey tower, 575 apartments, 50 metres down the ground and built up 325 metres high. It took us three and a half years," he said.

"Now we are building a 37-storey building. We are building only 97 apartments and it's taking us three and a half years."

Mr Abedian, who continues to build developments on the Gold Coast, wants the government to reverse its changes to property tax breaks and help developers subsidise home builds for first-time buyers, arguing investors could dominate new home purchases because they retained tax breaks for new builds.

"Forty per cent of every single dwelling produced is going to the investor," he said.

"What does it mean? It means that the rich [are] becoming richer and the poor [are] becoming poorer. And I can say from a selfish point of myself, thank you Mr Albanese [for making] me richer."

Economist says worst-case scenario could lead to recession

While some economists predict another rate rise in November, AMP chief economist Shane Oliver believes rates have peaked.

"There is still a risk, a high risk of one more hike," he said.

"But I think by the time we get to the November meeting, there will be enough evidence suggesting that the demand is really slowing in our economy and that will enable the Reserve Bank to leave rates on hold."

Mr Oliver said in a worst-case scenario where the Iran war dragged on, oil prices skyrocketed to $150 a barrel and people began to lose their jobs, house price falls could be as high as 20 per cent.

"This is already shaping up as the biggest downturn in property prices that we've seen in the last 40 years," he said.

"We're not there yet. The worst-case scenarios in the past few years have been an 8 per cent top-to-bottom fall."

He said anything more than 15 per cent could increase the risk of a recession.

"If you have a 20 per cent fall, then you're knocking about 2 per cent off consumer spending … that could tip us into a recession,"

he said.

Mr Oliver said even without a recession, the four rate hikes so far this year would hurt many, reducing what the amount an average wage earner on $109,000 could afford to pay for a home by about $45,000 compared to January this year.

"Average wage earners can currently afford to buy about a $500,000 property, but average property prices in Australia are around $900,000," he said.

"So that huge gap, it basically reflects the poor affordability problem that Australia faces."

Fewer home listings and sales

Cotality found that housing turnover had also eased, with the estimated number of national home sales over the past three months tracking 19.1 per cent lower than a year ago and 13.3 per cent below the previous five-year average.

There were also fewer fresh listings coming to market. Mr Lawless said capital city homes were now taking a median of 39 days to sell compared with 23 days a year ago, resulting in an accumulation of advertised supply.

Mr Lawless said rental vacancies had also risen despite a sharp pullback in investment.

He noted this might be because renters were forming larger households in an effort to combat stretched rental affordability.

The national vacancy rate reached 2 per cent in September, up from a record low of just 1.5 per cent in February 2026.

This is the highest national vacancy rate since January 2025, but still well below the pre-COVID decade average of 3.3 per cent.