Could Australian house prices really fall by 15%? With property values declining across major capital cities, buyer confidence weakening and interest rates remaining a significant concern, Australia’s housing market is facing growing uncertainty.

In this episode of The CEO Breakdown, John Saade, CEO of Latitude Accountants, examines Morgan Stanley’s revised housing market forecast, declining property transactions and the economic pressures affecting Australian homeowners, investors and businesses.

While falling property prices may create opportunities for prospective buyers, John raises a bigger concern: what happens when declining housing demand begins affecting construction activity, employment and the wider economy?

Here’s what the latest property market developments could mean for Australia.

Australian Property Market 2026: Why Are House Prices Falling?

Australia’s housing market is experiencing increasing pressure as borrowing costs, affordability constraints and weaker buyer sentiment influence purchasing decisions.

According to housing figures discussed in John’s breakdown, every Australian capital city recorded a quarterly property price decline, marking an unusual period of simultaneous market weakness.

The reported September 2026 quarterly house price movements included:

These figures illustrate the extent of the downturn discussed in the episode, although individual suburbs and property types may experience considerably different conditions.

John explains that the combination of elevated borrowing costs, reduced investor confidence and uncertainty surrounding future property values is encouraging buyers to delay major financial commitments.

Morgan Stanley Forecasts a Potential 10–15% Property Correction

One of the episode’s most significant developments is Morgan Stanley’s revised Australian property market outlook.

According to the reporting referenced by John, the investment bank increased its projected national housing correction from an earlier 5–10% decline to a potential 10–15% fall by the end of 2027.

If realised, the forecast would represent one of Australia’s most significant property market corrections in decades.

However, a national forecast does not mean every property will decline by the same percentage.

Housing performance depends on several factors, including:

• Local supply and buyer demand.
• Property type and location.
• Household income and employment conditions.
• Interest rates and borrowing capacity.
• Investor activity and rental market conditions.

John also notes that some locations may experience larger corrections than the national average, while others could demonstrate greater resilience.

Could Sydney House Prices Fall Even Further?

Sydney remains particularly exposed to affordability pressures because of its comparatively high property values.

John has previously discussed the possibility of a larger correction in Sydney, highlighting how expensive housing and elevated mortgage commitments can amplify the impact of higher interest rates.

However, any prediction of a 20% decline should be treated as an economic forecast rather than a guaranteed outcome.

How Interest Rates Are Affecting Australian Property Prices

Interest rates remain one of the most influential factors shaping Australia’s housing market.

During the episode, John discusses comments from RBA Deputy Governor Andrew Hauser concerning a worsening inflation outlook and the possibility of further monetary tightening.

Higher interest rates affect property markets through several channels.

Reduced Mortgage Borrowing Capacity

When borrowing costs increase, lenders assess prospective borrowers against higher repayment requirements.

This can reduce the amount households qualify to borrow, limiting purchasing power and placing downward pressure on property demand.

Higher Repayments for Existing Homeowners

Variable-rate borrowers may face increased mortgage repayments, leaving less disposable income available for other household expenses.

For highly leveraged property investors, higher interest expenses can also reduce investment cash flow.

Weaker Buyer Confidence

When prospective purchasers anticipate further interest rate increases or declining property values, they may postpone entering the market.

This reduced demand can contribute to longer selling periods, greater vendor discounts and weaker transaction volumes.

Falling Buyer Enquiries Could Create a Bigger Housing Supply Problem

One of John’s strongest concerns is that Australia’s property downturn could affect future housing construction.

In the episode, property developer Stockland was reported to have experienced a 71% annual decline in prospective buyer enquiries and a 29% reduction in sales across its master-planned communities.

These developments matter because residential construction depends heavily on sufficient buyer demand and commercially viable projects.

When fewer buyers commit to purchasing new homes, developers may delay projects or reconsider future investments.

This creates a challenging situation for Australia.

While declining prices may temporarily improve affordability for some buyers, reduced construction activity could constrain future housing supply.

For builders, tradies and construction-related businesses, weaker development activity can also translate into reduced revenue and greater financial uncertainty.

Has the Australian Housing Market Reached the Bottom?

Determining when property prices have reached their lowest point is difficult.

John argues that there are currently insufficient indicators to confidently suggest the market has bottomed.

Instead of attempting to predict an exact date, he recommends monitoring several important market signals:

• Interest rate expectations beginning to ease.
• Property sales increasing relative to available listings.
• Auction clearance rates showing sustained improvement.
• Buyer confidence and borrowing activity recovering.
• Housing affordability improving relative to rental costs.

These indicators can help provide a broader understanding of market conditions, although none can independently guarantee a recovery.

What Does a Property Market Correction Mean for Investors?

For property investors, declining asset values can create challenges that extend beyond short-term capital losses.

Investors who purchased properties using substantial borrowing may face greater financial exposure if market values decline while mortgage balances remain relatively unchanged.

This makes understanding investment fundamentals increasingly important.

Rather than relying exclusively on anticipated capital growth, investors should consider:

• Rental income compared with ongoing expenses.
• Mortgage repayments and interest costs.
• Property maintenance and holding costs.
• Tax obligations and available deductions.
• Cash-flow sustainability under different economic conditions.

An accountant can assist investors in reviewing their financial position, understanding property-related taxation and assessing how investment decisions affect their broader financial circumstances.

Could Falling Property Prices Affect Australia’s Wider Economy?

Australia’s housing sector supports significant activity across construction, banking, retail and professional services.

Consequently, a prolonged property downturn can have implications beyond residential property values.

John highlights weakening construction activity, corporate restructuring and rising unemployment concerns as potential indicators of broader economic pressure.

For Australian small business owners, these developments reinforce the importance of maintaining financial flexibility.

Accurate bookkeeping, realistic budgeting and proactive cash-flow forecasting can help businesses prepare for reduced consumer demand, higher financing costs and unexpected expenses.

Frequently Asked Questions About the Australian Property Market 2026

Will Australian house prices fall by 15%?

Morgan Stanley’s forecast discussed in the episode suggests a potential national property correction of 10–15% by the end of 2027. However, forecasts are subject to changing economic conditions and should not be treated as guaranteed outcomes.

Which Australian capital cities are experiencing falling property prices?

The September 2026 figures referenced in the episode indicate declines across Australian capital cities, with Perth, Brisbane and Sydney experiencing particularly significant quarterly falls.

Is 2026 a good time to buy an investment property?

This depends on individual financial circumstances, borrowing capacity, investment objectives and the property’s underlying fundamentals. Professional advice can help assess potential financial and taxation implications.

How can an accountant help property investors during a downturn?

An accountant can assist with investment property taxation, rental income reporting, deductible expenses, cash-flow assessments and reviewing the financial implications of existing investment structures.

Make Informed Financial Decisions with Latitude Accountants

Whether Australian property prices decline further or begin recovering, understanding your financial position remains essential.

At Latitude Accountants, we help property investors and Australian business owners navigate changing economic conditions through proactive accounting, tax planning and business advisory services.

From reviewing investment property tax obligations to improving business cash flow, our team can help you make informed decisions with confidence.

Get a FREE consultation for ABN holders.

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📧 info@latitudeaccountants.com.au

Disclaimer

This article provides general information only and does not constitute financial, tax, accounting, legal, property or business advice. Property market figures and forecasts referenced in this article are based on information discussed in The CEO Breakdown and should be independently verified against the latest published data. Economic forecasts are subject to change, and past market performance does not guarantee future outcomes. Seek professional advice regarding your individual circumstances before making financial or investment decisions.