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Australian housing prices have fallen for a sixth consecutive month, prompting National Australia Bank (NAB) to downgrade its forecast for the property market and predict an 8 per cent decline in capital-city dwelling prices over 2026.
The major bank’s latest Housing Monitor has revised its previous forecast of a 6 per cent decline, with prices now expected to fall around 11 per cent from peak to trough before finding a floor in the second quarter of 2027.
The revised forecast comes following four rate hikes so far this year and a federal budget that overhauled investor tax settings such as capital gains tax and negative gearing.
Sydney tipped for biggest decline
The deterioration has been led by Sydney and Melbourne, although NAB said the downturn has now broadened to the previously resilient midsized capitals.
Across the combined capitals, dwelling prices fell 1.2 per cent month on month in September, taking values 6.4 per cent below their March 2026 peak.
Sydney recorded another 1.4 per cent decline during September and is now 8.6 per cent below its recent peak, while Melbourne fell 0.7 per cent and is 7.2 per cent below its peak.
NAB economists said they expect Sydney to experience the largest peak-to-trough decline among the major capitals, forecasting a fall of around 14 per cent.
Melbourne, Brisbane, and Perth are each forecast to record declines of around 11 per cent from peak to trough, while Adelaide is expected to fall 8.5 per cent.
The bank said Brisbane prices are already 5.4 per cent below their recent peak, while Perth has fallen 6 per cent and Adelaide 2.9 per cent.
Unit prices also fell 0.8 per cent in September, pointing to a broader slowdown across different segments of the housing market.
CBA predicts 9% decline
Similarly, the Commonwealth Bank of Australia’s CEO Matt Comyn told ABC Radio that it is expecting a 9 per cent fall in house prices, with the fall not ending until “well into 2027”.
Comyn added, however, that Australia has been on a similar trajectory in the past.
“It’s also worth saying that you know, of course, people watch house prices very closely – it’s the majority of Australian household assets and wealth,” Comyn said.
“House prices fell by just over 8 per cent in 2022–2023 on a national basis, and of course would be up something in the order of 60 per cent over seven years.”
He added that CBA’s forecast would be returned to, following the publication of quarterly inflation data, noting that the bank still predicted rates to remain on hold for the rest of the year.
“I think that most likely that will be reviewed around the November time frame,” Comyn said.
Housing finance down
The weakening market is also being reflected in housing activity, with sales volumes slowing and the median time a property spends on the market rising to 41 days, the highest level since late 2020, according to NAB.
This is also feeding through to housing finance.
The value of new housing loan commitments fell 5.2 per cent quarter on quarter in the June quarter, driven by a 10.2 per cent decline in investor commitments.
Owner-occupier loan commitments also fell, although by a more modest 1.9 per cent over the quarter.
Meanwhile, the Reserve Bank of Australia’s (RBA) October 2026 Financial Stability Review, released last Thursday (1 October), found that most households and businesses appear resilient enough to manage a period of declining house prices or slowing economic growth.
Loan arrears have also been trending downwards across most borrower segments except for low doc, which has increased to 4.9 per cent. All housing sits roughly stable at 1 per cent.
Refinancing across all borrower segments has also spiked, with the value of owner-occupier (external) at $41.9 billion.
Low-deposit lending continues to rise
Despite the broader slowdown, NAB said only a small share of new housing lending is currently being written at high debt-to-income or loan-to-value ratios.
However, owner-occupied lending at LVRs of 90 per cent or higher increased late last year, alongside the 5 per cent Deposit First Home Guarantee Scheme.
Indeed, the 5 per cent Deposit Scheme has ticked past 100,000 buyers since its expansion one year ago.
Under different circumstances, first home buyers may have been able to capitalise on falling house prices. However, serviceability constraints and poor consumer confidence have kept many from entering the market.
Housing loan arrears remain at around 1 per cent of outstanding loans, although NAB noted that arrears have edged higher among low-documentation lending.
According to Cotality, the cumulative impact of four rate hikes this year has cut borrowing capacity by almost $90,000, which brokers have told Broker Daily has been the primary factor keeping FHBs out of the market.
Credit reporting bureau Equifax found that overall mortgage demand fell 14.1 per cent year on year compared with August last year, but the contraction among FHBs was steeper, at 20.1 per cent nationally in the same period.
Construction pipeline remains elevated
The housing market’s supply picture remains complicated, with around 250,000 residential dwellings still under construction.
NAB said this was around 40 per cent above the 2010–19 average, while dwelling starts have continued to pick up since late 2023, led by apartments. Starts are also still running ahead of completions.
For detached housing, starts continued to outpace completions in the June quarter, while completion times have shortened, but remain well above pre-pandemic levels.
Meanwhile, the latest Australian Bureau of Statistics (ABS) figures showed that total dwelling approvals fell 6.1 per cent to 16,953 in August, as a sharp retreat in higher-density projects outweighed another monthly gain in detached-house approvals.
Private-sector house approvals rose 3.7 per cent to 10,885 in seasonally adjusted terms, leaving them 18.4 per cent higher than a year earlier.
[Related: Westpac forecasts slump in investor activity following budget]
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