What Three Months of Falls Did to Yields

The AFL Grand Final long weekend printed 50.3% on 1,428 auctions across the combined capitals (1,035 reported: 525 cleared, 510 uncleared). Volume fell 22.1% from 1,832 and the preliminary rate slipped 3.7 points from 54.0%. Victoria took the Friday as a public holiday and Western Australia takes Monday for the King's Birthday, so this is a holiday-weekend print and the week-on-week move should not be over-read.

The mix of results matched recent weeks. 280 homes sold under the hammer, 233 sold before auction and 12 after, while 274 passed in and 236 were withdrawn, 16.5% of everything scheduled and up from 13.7% a week earlier. Cotality counts withdrawals as uncleared results, so the rise in withdrawals is already inside the 50.3%.

Last week's finals

The prior weekend's 54.0% preliminary finalised at 49.1% on 1,841 auctions held, a 4.9-point revision and 22.5 points below the 71.6% final of the same weekend in 2025. The city finals: Sydney 46.2% (569 held), Melbourne 54.2% (918), Brisbane 31.4% (176), Adelaide 46.4% (112) and Canberra 53.6% (56). Perth held 10 auctions, 5 successful. If this weekend's revision is similar, the 50.3% will finalise in the mid-40s.

Sydney carried the book

With Melbourne standing down, Sydney scheduled 790 auctions, up 37% on the week and more than half the national total. It cleared 53.6% (603 reported, 323 cleared), barely changed from 54.2%. The private-negotiation pattern of recent weeks continued: 182 homes sold before their auction against 139 under the hammer, 127 passed in and 153 were withdrawn, 19.4% of scheduled. On the same weekend last year Sydney took 1,171 homes to auction and cleared 73.5%, so the Sydney book is a third smaller than a year ago.

Melbourne: the Grand Final gap

Melbourne scheduled 286 auctions, down from 900 the weekend before, and cleared 48.8% (201 reported, 98 cleared), with 67 under the hammer, 26 sold prior, 55 passed in and 48 withdrawn. Last year's Grand Final weekend had 230 Melbourne auctions at 64.6%, so volume was in fact higher than a year ago. The clearance rate on a holiday book says little about the trend; the 54.2% final on last week's 918 auctions is the better Melbourne read.

Brisbane, Adelaide, Canberra, Perth, Tasmania

Brisbane rose to 42.6% from 37.5% (94 reported, 40 cleared), its best preliminary since mid-August, although 46 of 94 reported results still passed in. Adelaide fell to 39.3% from 58.2% on 56 results (22 cleared, 21 passed in, 13 withdrawn); after two strong weeks, one weak week on a sample this small is not a turn. Canberra held 53.9% (65 reported, 35 cleared) after last week's jump to 57.5%. Perth returned 14 results at 42.9% ahead of its long weekend and remains a private-sale market. Tasmania reported two auctions, one successful, which is why the combined cleared count (525) is one more than the sum of the six mainland capitals.

The year-ago comparison, and the second series

The equivalent weekend in 2025 was also Grand Final weekend, which makes this one of the cleaner year-on-year comparisons of the spring. Cotality's preliminary read then was 71.4% on 1,760 auctions. This year's 50.3% on 1,428 is 21.1 points lower on 18.9% less volume. By city: Sydney 53.6% against 73.5%, Melbourne 48.8% against 64.6%, Brisbane 42.6% against 66.1%, Adelaide 39.3% against 76.6% and Canberra 53.9% against 67.5%.

My Housing Market's separate count was 49.2%, from 50.6%, against 70.6% a year ago, with Sydney 56.2% on 1,029 auctions, Melbourne 59.5% (291), Brisbane 37.1% (133), Adelaide 40.8% (103) and Canberra 52.5% (90). The two series capture different auctions and close their counts at different times, so their levels differ, but both show the market about 21 points weaker than a year ago.

The cash rate is 4.35% going into Tuesday's decision, 2.30pm on 29 September. A week ago the major banks split on timing. Now CBA, Westpac, NAB and ANZ all expect a 25-basis-point rise to 4.60%. CBA, Westpac and ANZ brought their calls forward from November after Governor Michele Bullock told the House economics committee on 18 September that "some of these upside risks to inflation appear to be materialising", naming the Middle East conflict, AI investment and extreme weather as cost pressures. Markets price roughly a 90% chance of the September move, up from about 30% before the July CPI.

The banks now disagree on what follows. ANZ forecasts a second rise in November, to 4.85%, which would be the highest cash rate since 2008. CBA does not have a second rise in its base case but says a September-quarter trimmed mean of 1% or more could trigger one, and it has pushed its first cut from May to August 2027, with a second in November 2027. Westpac expects a split vote and flags follow-up risk. UBS also expects two more rises to 4.85% by November.

The oil channel

Brent crude rose from about US$80 to above US$100 a barrel in three weeks through early September and peaked near US$110, before easing to about US$98 by 23 September against a pre-war average of US$72. Pump prices lag crude, and the national unleaded average reached 227.3 cents a litre in the week to 20 September, up from 201.6c four weeks earlier, and diesel reached 273.6c. Fuel feeds headline inflation directly and household inflation expectations indirectly, and the second of those is what keeps a central bank hiking. The August monthly CPI lands on Wednesday 30 September, the day after the decision; in July headline inflation was 3.5% and trimmed mean 3.6%, still above the 2-3% target band.

What 4.60% does to the arithmetic

The average variable rate on investor loans was 6.41% in June. A 25-point rise takes that to about 6.66%. On a $600,000 interest-only investment loan, each 25-point rise costs $125 a month, $1,500 a year. Expressed against the property, at 80% LVR every 25 points adds 0.20% of the purchase price to annual interest. This year's 75 points have already added about $350 a month to repayments on the average new owner-occupier mortgage of $735,000 and cut a median-income borrower's capacity by about 7%. A fourth rise trims capacity by a further 2-3%, and borrowing capacity sets the marginal bid.

How to position

Assess any purchase at a 4.85% cash rate, which is ANZ's November case, rather than the 4.60% the market expects on Tuesday. If a deal needs today's rate to work, the second hike ANZ and UBS forecast would remove its margin before settlement. The date to frame a three-to-five-year hold around is CBA's August 2027 first cut, the earliest point at which falling rates start adding to borrowing capacity rather than subtracting from it.

The next SQM vacancy print (September) lands mid-October, so the rental read this week rests on August. National vacancy held at 1.3% for a third consecutive month on 41,039 vacant dwellings, 8.7% more than a year earlier. Canberra (2.1%), Melbourne (1.8%) and Sydney (1.7%) are the loose end; Brisbane (0.9%), Perth (0.6%), Adelaide (0.6%), Hobart (0.6%) and Darwin (0.4%) remain under 1%.

Rents over the quarter

Cotality's rent index rose 0.5% in June and 0.4% in each of July and August, about 1.3% over the quarter, and the annual rate eased to 5.7% from 5.9% in May. SQM's advertised rents were flat nationally in August for the first time this cycle, with Sydney down 0.6% (houses down 1.2%, to about $1,129 a week), Canberra down 1.6% and Melbourne units down 0.6%, against rises of 0.5% in Brisbane, 0.4% in Adelaide and 0.2% in Perth.

Annual rent growth to August on Cotality's measure splits the capitals in two. Darwin (11.4%), Perth (8.0%) and Hobart (7.9%) are still rising fast; Sydney (4.8%), Melbourne (5.0%) and Canberra (3.2%) are not. Unit rents follow the same split. That split, more than the price falls, decided which cities saw real yield repair this quarter.

Yields, May to August

Gross dwelling yields on Cotality's figures, end of May to end of August: Sydney 3.2% to 3.3%, Melbourne 3.9% to 4.0%, Brisbane 3.3% to 3.4%, Adelaide 3.4% to 3.6%, Perth 3.6% to 3.9%, Hobart 4.3% to 4.4%, Darwin 6.0% to 6.3% and Canberra 4.1% to 4.3%. The combined capitals moved from 3.45% to about 3.6%, the combined regionals from 4.2% to 4.3%, and the national figure to 3.79%, its highest since September 2019. Units yield more than houses in every capital: 4.4% against 2.9% in Sydney, 5.1% against 3.5% in Melbourne, 5.0% against 3.8% in Perth, and 4.6% against 3.5% nationally.

The seasonal test is dated. Asking rents usually firm from October into the December-January leasing peak. If that lift fails to appear in Sydney, Melbourne and Canberra, the yield in those cities will keep improving only as fast as prices fall, and on this quarter's evidence that is slowly.

What three months of falls did to yields

Three months of falling prices have done less for rental yields than most investors assume.

At the end of May the median capital-city dwelling was worth $1,030,973 and the combined-capitals gross yield was 3.45%. By the end of August the median was $990,394, down $40,579, and the yield was about 3.6%. Nationally, the median fell $28,979 to $912,885 and the gross yield reached 3.79%, the highest since September 2019. It is a real improvement, and it amounts to roughly 0.15 of a point in the capitals.

Where the gain came from

A gross yield is annual rent divided by value, so it rises when either rents climb or prices fall. Over the quarter national values fell 3.1% and rents rose about 1.3% (0.5% in June and 0.4% in each of July and August). On our arithmetic that split puts about 70% of the quarter's yield gain down to lower prices and 30% to higher rents. The rent side is also slowing. Advertised rents were flat nationally in August, and fell 0.6% in Sydney.

The biggest falls bought the smallest gains

City by city, on Cotality's one-decimal figures, the yield moved least where prices fell most. Sydney fell 4.7% over the quarter and its yield went from 3.2% to 3.3%. Melbourne fell 3.9% and went from 3.9% to 4.0%. Brisbane fell 2.7% and went from 3.3% to 3.4%. Perth fell 3.2% but gained 0.3 point, to 3.9%, and Adelaide gained 0.2 point, to 3.6%, on a fall of only 1.6%. Darwin's yield rose 0.3 point, to 6.3%, while its values rose 0.9%.

Source: Cotality Home Value Index releases for May and August 2026 (dwellings, gross yields rounded to one decimal; combined-capitals May figure 3.45% as published).

Two things explain the pattern. The first is arithmetic. A 5% price fall adds roughly 5% to whatever yield you start with, so at 3.2% it buys about 0.16 of a point and at 6.0% about 0.3. Low-yield markets need very large falls to reprice. The second is rent momentum. Perth rents rose 8.0% over the year to August and Darwin's 11.4%, against 4.8% in Sydney. In the cities where rents are still climbing, the yield improves from both sides at once.

What Tuesday costs

All four major banks expect the cash rate to rise to 4.60% on 29 September. For an investor borrowing 80% of the purchase price, a 25-point rise adds 0.20% of the property's value to the annual interest bill (0.25% on 80% of the price). One hike costs more than the entire yield gain the capitals recorded over the quarter.

The gap it widens is already large. The average variable rate on investor loans was 6.41% in June; after a 25-point rise, interest alone on an 80% loan is about 5.3% of the property's value a year. Among the capitals, only Darwin (houses 5.8%, units 7.4%) and Canberra units (5.4%) have a gross yield above that line. Canberra's high unit yield rests on 2.1% vacancy and falling rents, so it compensates for weakness. Melbourne units at 5.1% and Perth units at 5.0% sit just under. For Sydney's 3.3% to reach the line with rents unchanged, prices would have to fall close to 40%, far beyond even the more bearish forecasts in circulation, which put the peak-to-trough fall at around 10%.

These are gross yields, before strata, council rates, insurance, management and vacancy, so every one of these margins is thinner in practice.

The investor takeaway

A correction repairs yields slowly, and slowest in the markets where yields start lowest. Waiting for Sydney or Brisbane prices to fall into a cash-flow-neutral yield is waiting for something the arithmetic does not support. The quarter's evidence points to three rules instead. First, buy the yield you need at entry, because a further 5% fall adds only a fraction of a point to a low starting yield. Second, favour markets where rents are still rising on low vacancy (Perth, Darwin, Hobart and regional centres), where the yield improves without relying on price. Third, run the numbers at a 4.85% cash rate. If ANZ's November call proves right, a deal priced only for 4.60% will have lost its margin before settlement.

The week ahead

Three dated items. Tuesday 29 September, 2.30pm, the RBA Board decides, with all four majors expecting 4.60%; watch the statement for whether the Board leaves the door open to November. Wednesday 30 September the ABS publishes the August monthly CPI, a day too late to inform the decision but in time for November's. Thursday 1 October Cotality's September Home Value Index shows whether the sixth consecutive monthly fall came in above or below August's 0.9%, and opens the next quarter's yield count. Next weekend's auctions will also be distorted: NSW, the ACT, SA and Queensland have public holidays on Monday 5 October.