Overview
Back in April, we flagged the first cracks in Sydney and Melbourne's property markets since the pandemic. Four months on, that downturn hasn't just continued — it's spreading, and if you've been sitting on a deposit waiting for your moment, this is worth paying attention to.
New Cotality data shows national property prices fell 0.7 percent in July, the largest single monthly decline since December 2022, according to the ABC. Crucially, the slide is no longer confined to Sydney and Melbourne: Brisbane fell 0.6 percent and Adelaide 0.2 percent in July, marking a second consecutive month of declines for both cities. Perth and Darwin bucked the trend, edging up 0.1 percent and 0.8 percent respectively.
Cotality's head of research, Gerard Burg, told the ABC the Brisbane figures caught even the analysts off guard. "There's been a really rapid deterioration in conditions in Brisbane, which I think has probably been the most surprising trend that we've seen over the last couple of months," he said. He pointed to a jump in stock on the market there, from 25 percent below the five-year average in February to 6 percent above it now — in other words, buyers suddenly have a lot more to choose from.
Sydney and Melbourne are still leading the country on price falls in dollar terms. As reported by Guardian Australia, Sydney's median price has dropped $69,000 and Melbourne's $39,000 since February, while the national median now sits at $928,000, around $19,000 below its March peak. It's worth noting this is a pullback, not a collapse — prices in both Sydney and Melbourne remain higher than they were in January 2025.
On the ground in Melbourne, agents are already noticing first home buyers stepping up. "What we have seen lately in the last few weeks — the buyers are there, limited buyers," Melbourne real estate agent Shahid Khan told the ABC. "There's a bit of hesitancy in the marketplace, especially with the borrowing capacity, but first home buyers are still bidding strong."
Melbourne is also where the discounting shows up most clearly in the listings themselves. Analysis from property tracker Spachus found 29 percent of Melbourne homes for sale have had their asking price cut, compared with up to 12 percent in Sydney. Over the past three months, the median Melbourne property has sold for $23,750 less than its original asking price, with houses cut by around 14 percent, apartments 12.5 percent, and townhouses close to 20 percent.
"I think Melbourne probably started all the downward trend of property," Spachus founder Phil Seymour said. "It's been going down longer than people think. I think really it started to go down from the start of this year. But last year it was definitely showing signs of going down too."
So why is this happening? Three Reserve Bank interest rate hikes since February, ongoing uncertainty from the US-Iran war, and May's federal budget changes to negative gearing and capital gains tax concessions have all combined to cool demand, per Guardian Australia. NAB reported a 15 percent fall in home loan applications between the first and second quarters of the year, with Westpac, Equifax and Loan Market all independently reporting the same slide in mortgage demand.
Burg told the ABC the policy changes take time to filter through. "It is continuing to have an effect because these policy issues can take time for people to really process the change and consider what's happening," he said, adding that reduced borrowing capacity from the rate rises "tend[s] to fall over the space of a number of months" too.
Don't expect a crash, though. Former NAB chief economist Alan Oster told the ABC he puts the slowdown down mainly to higher interest rates, and while he'd expect a 10 to 15 percent price correction if unemployment climbed past 5 percent, Burg argues low unemployment, ongoing population growth and a genuinely difficult construction environment should keep this "a prolonged, but not necessarily enormously deep, downturn." Auction clearance rates, meanwhile, have already climbed from a June low of 47.4 percent back up to 53.6 percent, and new listings pulled back in July as sellers wait out the soft patch — both signs the market may be stabilising rather than falling further.
For first home buyers, that's the real takeaway: the window is genuinely open right now, with real dollars off asking prices and agents reporting first home buyers are still willing to bid. It just might not stay open forever. Rents certainly aren't easing in the meantime — as we reported in April, Sydney renters were already handing over 33.1 percent of household income to landlords, with the national rental shortage sitting 18 percent below the five-year average.
Top image: iStock