The housing market has turned — what it means for your financial plan
If you've caught the property headlines lately, you'll have noticed the tone has changed. After years of the market defying gravity, national home values fell 0.4% in June — the biggest monthly drop in three and a half years.
So what's actually going on, how far might it run, and what does it mean for your financial plan? Here's a plain-English rundown.
What's happening
Sydney and Melbourne are leading the fall. Sydney values dropped 1.2% in June and Melbourne 1.0%, with both cities down between 2.5% and 3.5% over the June quarter. Brisbane and Perth are still inching higher, and Adelaide has flattened out.
It's not just prices. Auction clearance rates have sat below 50% since late May, homes are taking longer to sell, and the number of properties changing hands is down about 16% on a year ago.
One important bit of context: even after June's fall, national home values are still around 7% higher than a year ago. This is a market coming off the boil, not falling off a cliff.
And while prices soften, rents are doing the opposite, vacancy rates are back at record lows and rents are rising close to 6% a year.
Why it's happening
Two things hit at once.
First, interest rates. The Reserve Bank lifted the cash rate three times this year, February, March and May - taking it from 3.60% to 4.35% and unwinding all of last year's cuts. That directly cuts how much buyers can borrow.
Second, tax changes. The Federal Budget announced changes to negative gearing and the capital gains tax discount, and that has cooled investor demand noticeably. The banks expect new investor lending to fall sharply over the rest of the year.
Add record-low affordability and slower population growth, and the market simply ran out of fuel.
What the forecasters say
The major banks have all downgraded their outlooks, but none of them are forecasting a crash.
Forecaster 2026 outlook CBA Flat nationally, Sydney and Melbourne to fall, stabilising early 2027 Westpac Flat across the capitals: Sydney −3%, Melbourne −4%, Perth and Brisbane still positive ANZ Modest growth overall, Sydney and Melbourne negative this year, then leading the recovery in 2027
The common thread: a softer second half of 2026, then conditions steadying through 2027 as interest rate cuts come back into view. For perspective, the largest peak-to-trough fall in capital city values over the past 40 years was 8.2%, and today's market still has real supports underneath it, including low stock levels, a chronic housing shortage, and a large pool of buyers purchasing without a mortgage at all.
What this means for your financial plan
If you own your home and aren't planning to move - this is mostly background noise. Your home is still worth well more than it was a year ago, and your financial plan shouldn't hinge on any single month's price index.
If you have a mortgage - no rate relief yet. The RBA meets next on 11 August, and most economists don't expect cuts until sometime in 2027. Budget on repayments staying where they are for now. If refinancing or a fixed-rate rollover is on your horizon, worth a conversation.
If you're thinking about an investment property - the maths has genuinely changed. Between the tax changes, higher rates and softer prices, numbers that stacked up a year ago may not stack up today. Re-run them properly before committing to anything.
If downsizing is part of your retirement plan - the strategy still works, but homes are taking longer to sell. Build in a buffer on both timing and price, and don't lock in retirement numbers based on last year's valuations.
If you're saving for your first home - softer prices help, but higher rates cut your borrowing power, and rising rents make saving harder. Worth a conversation about how your deposit savings are structured.
How we're thinking about it
Property is one asset among many. The same force cooling the housing market - higher interest rates - is the one we've been positioning client portfolios around all year. For our retired clients, plans are built so they never rely on selling a property at a particular price in a particular month. For clients still building wealth, this is a timely reminder that diversification matters, no single asset only goes up.
If anything here has you wondering about your own situation, get in touch. Happy to talk it through.
Sources
Cotality (formerly CoreLogic) Home Value Index, June 2026
Commonwealth Bank Economics — housing market outlook, June 2026
Westpac IQ — housing forecast update, May 2026
ANZ Research — capital city housing forecasts, 2026
Trading Economics and Property Update market data, July 2026
This article contains general information only. It does not take into account your objectives, financial situation or needs, and is not a substitute for personal financial advice. Before acting on any information, consider whether it is appropriate for your circumstances and speak with a licensed financial adviser. Information is current as at 6 July 2026 and drawn from third-party sources believed to be reliable. Forecasts are estimates only and are not a guarantee of future performance.