Australian house prices fall more sharply

Australian home prices fell 0.7% in July compared with June, marking the largest monthly decline since December 2022. The drop signals a clear turn in momentum after a period of earlier gains, with national annual price growth slowing to about 5.3%. The combination of a steeper month-on-month fall and moderating annual growth highlights growing pressure on the housing market.

Cotality’s data also show that previously reported figures for recent months have been revised lower. These revisions indicate that the slowdown has been unfolding more quickly than initially captured in early estimates. Together, the latest monthly decline and backward revisions point to a housing correction that has gained pace through mid-year.

Sydney and Melbourne again led July’s declines, with prices down 1.4% and 1.2% respectively over the month. Both cities are now more than 5% below their recent peaks, underscoring how quickly conditions have shifted in the largest and most closely watched markets. The size of the falls in these cities has been a key driver of the national price drop.

The weakness is no longer confined to the biggest capitals. Cotality recorded price falls in Brisbane and Adelaide in July, showing that softer conditions have spread to other metropolitan areas. The consultancy has highlighted particularly rapid weakening across some mid-sized capitals, reinforcing the view that the downturn is broadening.

Reserve Bank governor Michele Bullock has noted a slump in house prices and housing demand since May and described the shift as surprising. She said current interest rates are only "a bit" restrictive, suggesting that other forces are also weighing on buyer activity. Nonetheless, tighter monetary policy is a central element of the changing environment for borrowers and investors.

Analysts have pointed to three Reserve Bank rate increases this year and May budget changes to investor tax settings as key contributors to reduced housing demand. Adjustments affecting negative gearing and capital gains tax treatment for investors are seen as dampening investor appetite. These policy moves, combined with higher borrowing costs, have coincided with the recent acceleration in price declines across multiple Australian cities.