Australia’s property market is facing growing uncertainty in 2026. After several years of strong price growth, higher interest rates, rising household expenses and weaker buyer confidence are putting pressure on property values across the country.

The Commonwealth Bank of Australia (CBA) has warned that the housing market could experience one of its largest downturns on record, with forecasts pointing to price declines across the major capital cities. However, the potential impact is not expected to be the same everywhere. Some cities could experience sharper corrections than others, depending on local market conditions, affordability and the strength of recent price growth.

In this episode of The CEO Breakdown, John Saade of Latitude Accountants explores the outlook for the Australian property market in 2026, including how much house prices could fall across capital cities and what the forecasts could mean for homeowners, buyers and property investors.

Understanding these market movements is important because changes in property values can affect more than the price of a home. They can influence mortgage equity, borrowing capacity, investment returns and household finances. For business owners and investors, a property downturn may also create broader cash-flow and financial planning challenges.

What Is Driving the Australian Property Market Downturn?

Several economic factors are contributing to the weaker housing market. While property prices are influenced by local supply and demand, broader economic conditions can affect buyers and sellers across the country.

The main pressures include:

1. Higher Interest Rates

Higher interest rates increase the cost of borrowing and reduce how much prospective buyers can afford to borrow. Existing homeowners with variable-rate mortgages may also face higher repayments, leaving less money available for other expenses.

The Reserve Bank of Australia increased the cash rate to 4.85% in November 2026. This is adding further pressure to a property market already experiencing weaker demand.

2. Reduced Buyer Confidence

When buyers are uncertain about the economy, interest rates or future property values, they may delay purchasing decisions.

CBA’s November update highlighted weaker market activity, with sales over the previous three months reportedly 23% lower than a year earlier. Auction clearance rates have also fallen below 50% across the combined capital cities.

3. Household Budget Pressures

Higher mortgage repayments, insurance, utilities, groceries and other living expenses can make it harder for households to save for deposits or maintain existing loan commitments.

As household budgets become tighter, some buyers may reduce their spending or postpone entering the property market.

4. Previous Property Price Growth

Cities that experienced particularly strong price growth may be more exposed to a correction when borrowing conditions tighten.

Brisbane and Perth are examples. Both experienced substantial growth before the recent downturn, but CBA has now revised their forecasts to reflect a much sharper potential decline.

How Could Each Capital City Be Affected?

Although the national housing market is weakening, each capital city has its own economic conditions, housing supply and buyer demand.

Here is a closer look at CBA’s November 2026 forecasts.

Sydney: A 16% Potential Decline

Sydney is forecast to experience a 16% peak-to-trough decline in dwelling values.

As Australia’s largest property market, Sydney is particularly exposed to affordability pressures. High property prices mean buyers often need larger deposits and substantial borrowing capacity.

For existing homeowners, falling values could reduce available equity. Investors may also need to reassess rental returns, mortgage commitments and the long-term performance of their properties.

Melbourne: A 13% Potential Decline

Melbourne is forecast to experience a 13% decline.

The city’s property market has faced weaker buyer confidence and affordability challenges. Higher borrowing costs could further limit demand, particularly among buyers who need substantial mortgages to enter the market.

Homeowners and investors should review their financial commitments rather than assume property values will quickly return to previous levels.

Brisbane: An 18% Potential Decline

Brisbane has one of the largest projected declines, at 18%.

This is notable because the city experienced strong property growth in recent years. CBA’s revised forecast suggests that some of that previous momentum may have been driven by particularly strong buyer demand.

Despite ongoing housing supply pressures, prices could face further downward pressure if borrowing costs remain elevated and buyer confidence weakens.

Perth: An 18% Potential Decline

Perth is also forecast to experience an 18% peak-to-trough decline.

The city’s strong previous price growth has been followed by a significant change in market conditions. Longer selling periods and weaker buyer demand suggest that sellers may need to adjust their expectations.

Property investors should pay attention to rental income, vacancy periods, financing costs and the overall performance of their investments.

Adelaide: A 13% Potential Decline

Adelaide is forecast to experience a 13% decline.

Although it previously demonstrated resilience compared with some larger markets, the downturn is now spreading across more capital cities.

Homeowners and investors should consider how falling values could affect their equity, borrowing options and future property decisions.

CBA’s Australian Property Price Forecast for 2026 and 2027

CBA’s latest projections indicate that the downturn could continue beyond 2026.

Source: Commonwealth Bank November 2026 housing market forecast. Figures are forecasts, not guaranteed outcomes.

CBA expects national dwelling values to decline by approximately 8% over 2026, followed by a further 3% decline in 2027. The bank expects conditions to stabilise during the second half of 2027, although it does not anticipate a significant recovery immediately afterwards.

These projections highlight why homeowners and investors should avoid making financial decisions based solely on expectations of a quick market rebound.

What Does a Property Market Decline Mean for Homeowners and Investors?

Falling property prices can affect an individual’s financial position in several ways.

One of the biggest considerations is equity. When a property loses value, the difference between its market value and outstanding mortgage balance becomes smaller.

For example, consider someone who purchased a property for $750,000. If its value falls by 15%, it would be worth approximately $637,500.

If the outstanding mortgage is still $650,000, the property would be in negative equity by $12,500.

This simplified example demonstrates why recent buyers with substantial mortgages may be more exposed to a downturn.

Property investors also need to consider:

• Rental income: Is the property generating enough income to cover ongoing expenses?
• Loan repayments: Can the investment remain affordable if interest rates stay high?
• Tax obligations: Are rental income and eligible expenses being recorded accurately?
• Property expenses: Have insurance, maintenance, council rates and other costs been reviewed?
• Long-term returns: Does the investment still support the owner’s financial objectives?

A declining property valuation does not automatically mean an investment should be sold. However, reviewing its performance and understanding the financial risks can help investors make more informed decisions.

How Can Australians Prepare for Falling House Prices?

While homeowners cannot control property market movements, they can take steps to strengthen their financial position.

Consider the following practical measures:

1. Review your household budget: Understand your regular income, mortgage repayments and living expenses.
2. Monitor your mortgage: Check your interest rate, outstanding balance and repayment commitments.
3. Maintain emergency savings: Keep accessible funds available for unexpected expenses or changes in income.
4. Review investment properties: Assess rental income, property expenses and overall cash flow.
5. Organise financial records: Keep accurate records of property-related income, expenses and relevant tax documents.
6. Avoid rushed decisions: Consider your long-term financial position before selling, refinancing or purchasing another property.
7. Seek professional guidance: Speak with qualified professionals about your accounting, tax and financial circumstances.

For business owners, a weaker property market may also affect customer spending, construction activity and business confidence. Reviewing cash flow, operating expenses and financial forecasts can help businesses prepare for changing economic conditions.

Frequently Asked Questions About the Australian Property Market in 2026

How much could Australian house prices fall in 2026?

CBA forecasts that national dwelling values could decline by approximately 14% from peak to trough. The five-capital city average is forecast to fall by around 15%.

Which Australian capital cities could experience the biggest price falls?

Brisbane and Perth are forecast to experience the largest declines at 18%, followed by Sydney at 16%, and Melbourne and Adelaide at 13%.

Why are Australian property prices falling?

Higher interest rates, reduced borrowing capacity, weaker buyer confidence and household budget pressures are contributing to the downturn. Previous strong price growth in some cities may also make them more vulnerable to corrections.

Will Australian property prices recover in 2027?

CBA expects the market to stabilise during the second half of 2027. However, stabilisation does not necessarily mean prices will immediately return to their previous highs.

Is it a good time to buy property in Australia?

Lower property prices may create opportunities for buyers, but affordability, borrowing costs, employment stability and individual financial circumstances should all be considered before purchasing.

How can property investors prepare for falling prices?

Investors should review rental income, mortgage repayments, ongoing property expenses, available savings and tax obligations. Understanding cash flow and investment performance can help them prepare for changing market conditions.

Speak With Latitude Accountants

Changes in the Australian property market can affect homeowners, investors and business owners in different ways. Having a clear understanding of your financial position is an important part of preparing for economic uncertainty.

At Latitude Accountants, John Saade and the team provide accounting, tax and business advisory services to help Australians make informed financial decisions.

Whether you need assistance with tax planning, investment property accounting or business finances, our team is here to help.

Contact Latitude Accountants today:

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton | Adelaide
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article is intended for general informational purposes only and should not be considered financial, tax, accounting, legal, property or investment advice. Property market forecasts are estimates and may change as economic conditions evolve. Actual property prices and market outcomes may differ from the projections discussed. Readers should seek independent professional advice before making financial, property or investment decisions based on their individual circumstances.