Australia house prices see steepest quarterly drop on record, Domain says
Australian house prices fell 4.7 per cent in the September quarter, marking the steepest quarterly drop on record according to data from Domain. The decline affected every capital city for the first time in 15 years, driving combined capital city house prices to $1,226,566. While Domain noted that markets are moving in the same direction, Morgan Stanley analysts warn the downturn will deepen further.
Perth Sees Sharpest House Price Drop
The severity of the quarterly contraction varied significantly across metropolitan regions. Domain figures show Perth experienced the sharpest drop at 7.4 per cent. Australia’s largest housing markets also recorded substantial losses, with Sydney house prices falling 4.7 per cent and Melbourne dropping 3.3 per cent over the quarter. Unit prices across the capitals declined by 3.5 per cent, marking the second consecutive quarter that both property types decreased.
Property data firm Cotality reported that price falls were not distributed evenly within individual cities. Australia’s most valuable homes suffered the steepest declines, whereas lower-value properties remained relatively stable. In Sydney, the top quartile of homes dropped in value at more than twice the rate of the lowest quartile.
Driving Factors Behind the Demand-Led Downturn
The Reserve Bank of Australia implemented four interest rate rises this year, pushing the cash rate from 3.60 to 4.60 per cent. Those monetary policy adjustments contributed heavily to evaporating consumer confidence and reduced borrowing capacity. Cotality figures indicate auction activity roughly halved compared to the previous year, with 1,423 auctions recorded across capital cities.
Morgan Stanley Predicts Deeper Home Value Falls
Market analysts disagree on the ultimate depth and duration of the correction. While Domain pointed to a shift in market power favoring buyers as homes take longer to sell, Morgan Stanley revised its market trajectory. The investment bank warned clients that national home values could fall between 10 and 15 per cent from their peak by the second half of 2027. That projection exceeds earlier estimates made following changes to property investment taxation in the federal budget.
Morgan Stanley analysts stated that interest rates remain the primary sensitivity governing the depth of the downturn. They do not expect market indicators—such as rising home sales relative to listings, anticipated rate cuts, and auction clearance rates—to stabilize before mid-2027.