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According to the data analytics company, more affordable properties and units have proven more insulated from the slump in demand, although most capital cities have still recorded more moderate price falls across their lower-value segments.
Housing values have now been declining for several months, with the national market turning negative in April after Sydney and Melbourne began falling the month before.
At Cotality’s last reading, national median housing values had fallen 3.6 per cent from their March 2026 peak.
This year, the Australian housing market has weathered three rate hikes and a federal budget that overhauled investor tax settings.
Divergence emerges
Cotality’s September Monthly Housing Chart Pack found that the gap in value change between higher and lower-value properties has become particularly pronounced in Sydney and Melbourne.
Over the three months to August, values across the highest-value 25 per cent of Sydney dwellings fell 5.7 per cent, compared with a 2.1 per cent decline across the lowest 25 per cent.
Melbourne recorded a similar pattern, with the highest-value quartile falling 5.3 per cent over the same period, compared with a 2 per cent decline among the lowest 25 per cent.
Cotality added that upper-quartile house values in Sydney and Melbourne are already more than 10 per cent below their peaks, while the mid-sized capitals have recorded smaller and more even declines.
That divergence, however, is less pronounced in markets such as Perth, where values across the three segments fell by a similar amount over the three months to August.
Perth’s lowest-value quartile fell 3 per cent, compared with a 3.4 per cent decline across the middle 50 per cent and a 2.9 per cent fall among the highest 25 per cent.
Brisbane also recorded a relatively narrow gap, with the lowest-value segment falling 2.0 per cent over the three months to August, compared with a 2.8 per cent decline at the top end.
While Darwin continued to buck the downward trend, with dwelling values rising 0.9 per cent over the three months to August and 14.6 per cent over the year, performance still varied by segment.
The lowest 25 per cent of properties in the Northern Territory capital rose 3.1 per cent over the three months to August, compared with a 0.3 per cent increase among the highest-value properties.
Across the national market, dwelling values fell 3.1 per cent over the three months to August, with the combined capitals down 3.7 per cent and regional markets falling 1.2 per cent.
Units hold up better
Units have generally been more resilient than higher-value homes, with Cotality highlighting the different performance across dwelling types.
The company found upper-quartile unit values were substantially lower in Sydney, Melbourne, and Adelaide, although the falls were more modest in the ACT.
The data also shows the spread between value segments has been more pronounced for units in some of the larger capitals, particularly Melbourne and Sydney, while the difference between the upper and lower quartiles has been narrower in Brisbane and Perth.
Canberra was an exception to the broader pattern, with the lower 25 per cent of unit values falling 2.9 per cent over the three months to August, compared with a 1.6 per cent decline among the highest-value units.
Affordability driving low-end demand
Cotality head of research, Gerard Burg, said housing options offering a cheaper route into the market had proved more resilient as demand shifted towards more affordable properties.
“Units have generally proven more resilient throughout the downturn, supported by their relative affordability and lower entry price point,” he said.
Indeed, affordability has become an increasingly pertinent issue and a focus of the Senate select committee on intergenerational housing inequity.
According to REA Group’s Housing Affordability Index, affordability has fallen to its worst level ever recorded, with the average household (earning a salary of $125,000) able to purchase 12 per cent of the homes sold across the 2026 financial year.
Despite the recent slump, the report found home prices increased by just over 5 per cent between FY25 and FY26, while mortgage rates rose from 5.8 per cent to 6.3 per cent following three RBA rate hikes.
While household incomes increased by an estimated 4.5 per cent over the year, this was not enough to offset the increase in prices and borrowing costs.
Buyers have more space to negotiate
The weakening market is also giving buyers more room to negotiate, with properties taking longer to sell and vendor discounts widening.
Homes took a median 39 days to sell over the three months to August, up from 28 days a year earlier. Sydney recorded a median of 45 days on market and Melbourne 43 days, while Perth was the fastest at 22 days, up from 12 days a year earlier.
The median vendor discount across the combined capitals reached 4.2 per cent over the three months to August, its largest level in at least two years.
Nationally, the median discount reached 4.0 per cent, up from around 3.1 per cent at the start of the year, while the combined regional discount increased to 3.8 per cent.
At the same time, total listings climbed to 139,167 in the four weeks to 6 September, 18.1 per cent higher than a year earlier and 2.2 per cent above the five-year average.
Brokers have also told Broker Daily that they have seen behaviour change, with buyers often taking more time, buying well within their capacity, and often opting for private treaty over auctions.
[Related: Westpac forecasts slump in investor activity following budget]
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