Interest rate hikes and tax changes targeting investors have triggered widespread price falls, but values are still within 1% of record highs.
Australia’s housing market has declined for a third straight month, according to the latest PropTrack Home Price Index.
Prices fell during June in all the capital cities except Darwin, where values rose 0.2%.
Sydney, Perth, Melbourne and Canberra recorded the largest falls, while Brisbane, Adelaide and Hobart had more modest declines.
But despite falling prices, the national median home value is still higher than it was in February, when the Reserve Bank raised interest rates for the first time since 2023.
How home values changed in June
REA Group senior economist Anne Flaherty said the decline in prices had resulted from this year’s interest rate rises and recent property tax changes.
“Weighing on home prices has been the cumulative impact of three interest rate rises which have reduced borrowing capacities for buyers,” she said.
“Changes to housing taxation following the 2026 Federal Budget also appear to be impacting the market.”
Under measures introduced in the budget, negative gearing will be restricted to new homes only, and the 50% capital gains discount for assets held for more than 12 months will be abolished and replaced with an inflation-indexation model.
The reforms were intended to level the playing field between first-home buyers and investors, who had become increasingly active in the past year as home prices rose.
Tax changes in the budget are designed to ease competition for first-home buyers and push investors towards new builds to increase housing supply. Picture: Getty
“These changes are expected to reduce investor demand, which could contribute to an overall reduction in buyer demand,” Ms Flaherty said.
However the uncertainty triggered by the changes may be having a wider effect than intended.
Ms Flaherty said the budget may have contributed to more cautious decision making among both owner occupiers and investors.
But although homeowners may lament the decline in prices and some investors may remain on the sidelines, the dip has created an opportunity for first-home buyers to get into the market for less.
“Overall, conditions appear to have improved for first-home buyers, who will benefit from lower home prices and less investor competition in 2026,” Ms Flaherty said.
Prices still close to record highs
This year’s downturn follows considerable strength in property values over the past year, putting the price falls in perspective.
Even after three months of falls, property prices are still almost as expensive as ever.
The national median home value is just 0.9% lower than it was in March, when home prices hit a record high.
“While prices were lower over June, most homeowners are still sitting on significant gains, with the median price of home 5.8%, or $71,900, higher compared to a year ago,” Ms Flaherty said.
Prices in Brisbane declined 0.2% in June, but are still almost 14% higher than a year ago. Picture: Getty
In the past year prices grew by about 17% in Perth and Darwin, about 14% in Brisbane, about 12% in Adelaide and about 9% in Hobart.
Home values have grown by almost 35% in the past five years at the national level, and are up 81% in Adelaide, 85% in Brisbane and 96% in Perth.
Affordable market segments holding up best
The strongest-performing parts of the market were areas offering the greatest affordability, the report showed.
“Regional markets outperformed capitals over both the month and the year,” Ms Flaherty said.
Six of the top 10 housing markets for price growth over the past year were in regional Australia, while four were in Perth, which has been the strongest capital city market for several years.
Affordable property types have been in favour with buyers too, with units outperforming houses for price growth.
“Units have recorded smaller declines over the month compared to houses, and have seen stronger growth over the year.”
This phenomenon was most evident in Sydney, where unit values rose by 0.2% during June while house values declined 0.8%.
Unit prices have held up better than houses, suggesting buyers are seeking affordability amid high interest rates. Picture: Getty
Affordability constraints had driven the outperformance of less expensive properties such as units, Ms Flaherty said.
“Despite recent declines, home prices remain close to record highs and houses have become out of reach for a growing share of buyers, driving more to the unit market.”
Buyers digest budget fallout
Despite prices declining recently, there was an improved mood in the market as buyers came to grips with what the budget meant for the market, said Sydney real estate agent and Highland Inner West director Anthony Tripodi.
“The past three months have been challenging but there’s been more of a positive vibe in the past three weeks,” he said.
The number of people at open homes had increased, Mr Tripodi said, but buyers were still cautious.
“If interest rates maintain at a standstill and the hangover of the budget sentiment settles, I think buyer confidence will come back and the market will normalise.”
Real estate agent Aaron Boud of Acton Belle Property Mandurah said the budget had shifted the dynamic in the local market, where prices remained 19% higher than a year ago.
“Over the last few years we’ve had a lot of investors but that has quietened down since the budget,” he said.
“A lot of buyers are being more conscious about making more informed decisions.”
However, a sharp decline in prices was unlikely given the lack of homes available.
“We still have a huge supply and demand issue," he said. "We don’t have enough supply for our demand.”
Price moves dependent on rates
The path of interest rates would influence future price movements, Ms Flaherty said.
“While there is still the potential for another interest rate rise before the end of 2026, expectations of additional hikes have moderated.”
“Once it becomes clear interest rates have peaked, this is likely to see confidence improve among buyers.”
Get your realEstimate™
Track your property's value and unlock insights and data tailored for property owners.
Meanwhile, the full impact of recent tax changes remains uncertain.
“While these changes are expected to contribute to softer home prices over the short term, over a longer term horizon, the fundamentals of Australia’s housing market remain the same,” Ms Flaherty said.
“Most capital cities and regional areas remain undersupplied relative to population growth, which will limit the extent to which home prices can fall.”
Source: realestate.com.au Property Market Outlook - June 2026
Home prices are projected to decline in the major capitals this year, before growth resumes in 2027, according to the latest realestate.com.au Property Market Outlook.
English (US) · 