House Prices Fell in Every Capital at Once: What That Changes for Buyers

The combined capitals cleared a preliminary 48.4% on 1,882 auctions, down from 51.2% on 1,423 a week earlier and the lowest preliminary print outside a long weekend since late June (47.4% on 21 June). Of 1,361 results collected, 669 sold and 692 did not. Volume rose 32% on the week, close to the roughly 1,900 Cotality had expected, almost all of it from Melbourne. Against the same weekend last year, when 3,253 homes went to auction and 70.5% cleared, volume is 42% lower and the clearance rate 22.1 points lower (Cotality).

Cotality's final figure for last weekend had not been published when this edition went out; the weekend before (11 October) finalised at 44.1% on 1,749, and recent finals have settled 3 to 5 points below the preliminary read, so this weekend's final is likely to land in the mid-40s.

City by city

Melbourne cleared 54.8% on 831 auctions (363 sold, 300 not), down from 56.2% on 500. Vendors brought auctions forward before the Spring Racing Carnival, lifting volume 66% on the week; the same thing happened a year ago, when 1,835 Melbourne homes went under the hammer on the matching weekend and 71.8% cleared. It was the second weekend of Victoria's reserve price disclosure rules, and the first on a full-sized book. Expect a much smaller Melbourne book next weekend.

Sydney cleared 48.2% on 631 (212 sold, 228 not), down from 54.6% and its lowest preliminary rate since 19 July (47.4%). A year ago Sydney cleared 68.2% on 959.

Brisbane cleared 25.2% on 200 (31 of 123 results), the weakest of the capitals and down from 31.5%; a year ago 73.5% of 190 cleared. Adelaide improved to 42.5% on 141 (31 of 73) from 36.4%, against 70.8% a year ago. Canberra eased to 52.1% on 60 (25 of 48) from 65.9%. Perth sold 7 of 14 results on 19 auctions. Tasmania was not reported.

My Housing Market, which counts the week to Saturday, read the national rate at 43.4% (46.5% the week before, 67.2% a year ago), with Sydney at 51.0% on 885 auctions and Melbourne at 58.5% on 838.

Prices: the September quarter and October to date

Domain's September-quarter House Price Report (22 October) showed house prices falling in all eight capitals in the same quarter for the first time in 15 years. Combined-capitals houses fell 4.7% to $1,226,566 and units 3.5% to $702,858. By capital, house medians fell 7.4% in Perth ($1,115,227, a record), 5.4% in Brisbane ($1,152,122, a record, ending 14 quarters of growth), 4.7% in Sydney ($1,661,167), 3.3% in Melbourne ($1,014,335, a five-year low), 3.0% in Adelaide ($1,095,429, equal to the 2009 record) and Hobart ($790,155), and 2.6% in Canberra and Darwin. Units fell everywhere except Darwin (+2.2%), with Perth (-6.5%) and Canberra (-4.2%) the weakest.

Cotality's daily index, as at 25 October, has the five-capital aggregate down 4.2% over three months and 4.0% over the year. On our arithmetic against the September month-end values, October to date is about -1.3% in Sydney, Brisbane and Perth, -0.8% in Adelaide and -0.7% in Melbourne, or about -1.2% for the aggregate. Over the year, Sydney is down 8.9% and Melbourne 7.4%, while Perth (+6.2%), Adelaide (+4.6%) and Brisbane (+2.5%) are still higher. Cotality's October index is released on Monday 2 November.

The cash rate is 4.60%, and the next decision is at 2:30pm on Tuesday 3 November, Melbourne Cup Day, with the Statement on Monetary Policy. A week ago, after September's jobs data, market pricing for a rise sat below 20%. Two RBA appearances moved it back.

Kent, Monday

At the Commonwealth Bank's Global Markets Conference, Assistant Governor Christopher Kent described overall financial conditions as "somewhat restrictive" and said the question the Board faces at each meeting is "is it restrictive enough?" He said there is "reasonable evidence" that neutral rates are rising. Asked about housing, he said the investor tax changes are "moving in the same direction as monetary policy", and that the effect on investor credit is "one of the larger moves in recent tightening phases".

Hauser, Wednesday

At Citi's investment conference, Deputy Governor Andrew Hauser said "the inflation outlook looks materially worse than we projected in the August report", with oil prices about a third above the August assumption, and that the September-quarter trimmed mean is "going to be bigger than we assumed". He described the housing market as "undergoing quite a major correction" and said about 2% of mortgages and 15% of renters are in negative cash flow. Market odds of a 3 November rise moved to about 51% the same day (Bloomberg); CBA's rates team put the move at 24% to 56%.

What the banks expect

UBS, Westpac and ANZ expect a rise to 4.85%. CBA and NAB keep a hold as their base case, CBA calling the meeting "live". For Wednesday's September-quarter CPI, CBA expects trimmed mean of 1.0% for the quarter and 3.6% for the year, and headline of 1.3% for the quarter. Governor Bullock appears at Senate Estimates the same day.

What it means for borrowing

A 25-point rise would take an illustrative 6.75% investor variable rate to about 7.00%, adding about $125 a month in interest on a $600,000 interest-only loan. APRA's serviceability buffer of 3 points would lift assessment rates to around 10%, trimming borrowing capacity by about 2% for a typical investor. We now stress-test purchases at 7.25%. Outside the RBA, consumer confidence remains near record lows: the ANZ-Roy Morgan index fell to 67.7, 16.3 points below a year ago.

SQM's September print, the latest, put national vacancy at 1.4%, up from 1.3% in August and 1.2% a year ago, on 42,290 vacant rentals, 17% more than a year earlier. Melbourne and Canberra (1.9%) and Sydney (1.8%) are the loose end, while Brisbane (0.9%), Perth and Adelaide (0.6%), Darwin (0.6%) and Hobart (0.5%) remain under 1%. The October figures are due in mid-November.

Houses and units split

Over the 30 days to 12 October, national house asking rents rose 1.6% while unit rents fell 1.6%, and unit rents fell in seven of the eight capitals. In Sydney, house rents rose 2.3% to $1,159 a week and unit rents fell 1.0% to $749; Melbourne units fell 1.3% to $594. SQM's weekly series to 20 October has national combined asking rents at $706 a week, 6.9% higher than a year ago, so annual rent growth is still positive but slowing.

Yields and interest cover

On Cotality's September yields (national 3.85%), gross rent on an 80% interest-only loan at an illustrative 6.75% covers about 63% of interest in Sydney, 65% in Brisbane, 67% in Adelaide, 74% in Perth, 76% in Melbourne and 81% in Hobart and Canberra, before costs. At 7.00% those ratios fall by about 3 to 4 points each. Hauser's figure of 15% of renters in negative cash flow means rent growth from here depends on tenants' incomes as much as on vacancy.

House prices fell in every capital at once. What that changes for buyers

Domain's September-quarter House Price Report, released on Thursday, confirmed what the monthly indices had been signalling since winter. House prices fell in all eight capitals in the same quarter, the first time in 15 years and only the second time on record. The combined-capitals house median fell 4.7% to $1,226,566, 6.2% below the March peak, and the unit median fell 3.5% to $702,858. Darwin units, up 2.2%, were the only capital-city market of either type to rise (Domain).

The boom markets reversed hardest

For most of the past two years the national story was two-speed: Sydney and Melbourne soft, Perth, Brisbane and Adelaide rising. The September quarter ended that. Perth houses fell 7.4% and units 6.5%, both the largest quarterly falls on record and the steepest of any capital. Brisbane houses fell 5.4%, ending a 14-quarter run of growth, and houses and units there fell together for the first time in 6.5 years. Adelaide houses fell 3.0%, equal to the March 2009 record, ending a 13-quarter run. Sydney houses fell 4.7% to a two-year low, 7.9% below the December peak, and Melbourne's 3.3% fall took its house median to a five-year low (Domain). Investors who rotated into the momentum markets over 2024 and 2025 are now holding the assets with the most downward momentum.

October has not turned it

Domain's medians describe the quarter to September. Cotality's daily index shows the fall continuing. On our arithmetic the five-capital aggregate is about 1.2% lower in the month to 25 October, with Sydney, Brisbane and Perth each down about 1.3%, Adelaide 0.8% and Melbourne 0.7%. Over three months, Sydney and Perth are down 4.7% and the aggregate 4.2%. The combined capitals also cleared a preliminary 48.4% this weekend, the lowest outside a long weekend since late June, on 42% fewer auctions than a year ago (Cotality).

Rates are back in play

A week ago the September jobs data had pushed market pricing for a November rise below 20%. On Wednesday, Deputy Governor Andrew Hauser said the inflation outlook "looks materially worse than we projected in the August report", with oil prices about a third above the August assumption, and described housing as "undergoing quite a major correction". Market odds of a 3 November rise rose to about 51% (Bloomberg). Assistant Governor Christopher Kent had said on Monday that the question for the Board is whether policy is "restrictive enough", and that the investor tax changes are "moving in the same direction as monetary policy". Wednesday's September-quarter CPI is the decider; CBA expects trimmed mean of 1.0% for the quarter and 3.6% for the year, above the RBA's August track.

What a synchronised fall changes

A downturn confined to two cities leaves an investor somewhere to go. One that covers every capital removes that option, so the case for any purchase has to stand on rent and on the price paid, not on which city turns first. Three things follow. First, buyers have the negotiating power. Cotality's October chart pack put total listings 19% above a year ago, capital-city homes taking a median 41 days to sell and the median vendor discount at 4.4%, and a discount won at purchase is locked in from settlement. Second, the momentum markets need the most care. Perth, Brisbane and Adelaide still have the lowest vacancy in the country (0.6% to 0.9%, SQM Research), which protects the rent, but the prices that ran hardest have the most room to give back. Third, the rate assumption has moved. A 25-point rise would take an illustrative 6.75% investor rate to about 7.00%, adding about $125 a month in interest on a $600,000 interest-only loan, so we now stress-test at 7.25%.

What would change our view

A soft CPI on Wednesday and a hold on 3 November would take the immediate rate risk off the table. The signal that the downturn is ending would be a run of monthly index rises alongside a clearance rate back above 60% on normal volumes. Neither is in the data yet. Our full read of the Domain report, city by city, with profiles for holders and buyers, is in this week's research article.

The week ahead

Tuesday 27 October: ANZ-Roy Morgan consumer confidence. Wednesday 28 October: the September-quarter CPI at 11:30am, the main input into the 3 November decision, and Governor Bullock at Senate Estimates. Thursday 29 October: Cotality's final clearance rates. Saturday 31 October: a smaller auction weekend as Melbourne pauses for the Spring Racing Carnival; the self-lodger tax return deadline. Monday 2 November: Cotality's October index. Tuesday 3 November: the RBA decision and Statement on Monetary Policy; Victoria enters caretaker mode ahead of the 28 November election.