Australia's housing downturn is now expected to become the largest in the history of the national monthly price series as higher interest rates and a broadening correction weigh on the market.
Analysis published on Tuesday by Commonwealth Bank Senior Economist Trent Saunders revised CBA's dwelling price forecasts lower, with national prices now expected to fall around 14% from peak to trough and the five-capital city average around 15%.
The downgrade follows a faster and broader decline than CBA expected when it last updated its forecasts in September. At that time, CBA projected a national peak-to-trough fall of around 9%, compared with the 14% now expected
The market has weakened sharply since.
Price falls gather pace
National dwelling values fell 1.2% in October, their seventh consecutive monthly decline, leaving prices 6.7% below their March peak.
The combined five-capital city index is already 8.2% below its March peak. The pace of decline is the fastest in at least 40 years and is already close to the 8.6% peak-to-trough fall recorded during the 2017 to 2019 downturn.
Property industry data firm Cotality this week reported that Sydney remains the weakest major market, with values around 10% below their February peak. More recently, however, Brisbane and Perth have recorded even faster monthly falls.
Brisbane values fell 2% in October and are now 8.3% below their May peak, while Perth is down 8.9% from its April peak. Cotality also reported that virtually every suburb across Brisbane, Perth and Adelaide recorded a fall over the past three months.
Data cited in CBA's analysis also point to softer selling conditions. Sales over the past three months were 23% lower than a year earlier, auction clearance rates across the combined capitals were below 50% and homes were taking longer to sell.
Brisbane and Perth forecasts cut sharply
The biggest changes to CBA's own forecasts are in Brisbane and Perth.
Prices in both cities are now expected to fall around 18% from peak to trough, compared with declines of around 8% forecast in September.
Sydney's forecast peak-to-trough fall has increased from 13% to around 16%, while Melbourne has moved from 12% to around 13%. Adelaide is now also expected to fall around 13%, compared with 8% in the September forecast.
The reversal in Brisbane and Perth is particularly notable after the strong gains recorded through 2025 and into 2026.
Saunders said supportive supply and demand conditions remain in place, but the speed of the reversal suggests overexuberance became a more important driver of price growth as the previous upswing progressed.
Even after the forecast falls, prices in Brisbane and Perth would remain well above their levels before the recent upswing.
Higher rates extend the adjustment
Interest rates are also adding to the pressure.
At its November meeting the Reserve Bank of Australia raised the cash rate by 25 basis points to 4.85%, its fifth increase of 2026 and in line with the interest-rate assumption underpinning CBA's latest housing forecasts.
When the September housing forecasts were prepared, CBA expected the cash rate to peak at 4.60%.
CommBank economists last week shifted their call to a November rate rise as inflation risks increased and the RBA signalled greater concern about price pressures.
Saunders estimates that a cash rate peak of 4.85%, compared with a scenario where rates had peaked at 4.60%, reduces national dwelling price growth in 2027 by around 2 percentage points.
When could prices stabilise?
CBA now forecasts national dwelling prices to fall 8% over 2026 and another 3% in 2027.
Saunders expects the market to stabilise during the second half of next year, supported by lower dwelling prices, higher rental yields, tight underlying housing supply and an eventual easing in monetary policy.
CBA does not expect a material recovery at that point, however, and Saunders said uncertainty around the interest-rate outlook remains.
