Cotality Home Value Index July 2026: The Downturn Broadens — Largest Monthly Fall Since December 2022

This analysis reflects conditions as at the July 2026 release. Monthly price data dates quickly, and index providers revise their figures as more settlements land — July itself contains a live example. All growth figures are Cotality's unless otherwise attributed.

Quick Data Snapshot — July 2026

• National dwelling values: −0.7% for the month — the steepest fall since December 2022.
• National median: $928,421; roughly 1.4% below the March 2026 peak (our derivation from published monthlies — approximate).
• Combined capitals median: $1,010,814.
• Combined regionals: −0.2% for the month (median $769,867) — the first regional decline since January 2023.
• Price tiers (3 months to July): upper quartile −3.2%, lower quartile +0.3% nationally.
• Auction clearances: 53.6% combined capitals for the week ending 2 August; Sydney below 50%.

The eight capitals — July 2026 (Cotality HVI)

Source: Cotality Home Value Index, July 2026 (released 3 August 2026). Index first prints are provisional and subject to revision as settlements land.

For the running month-by-month series and the full context around each release, see our Home Value Index Tracker, which is updated within days of every print.

The Headline: The July Home Value Index Takes the Downturn National

The June release framed a question: would the mid-sized capitals hold while the two largest cities fell? July answered it. Cotality's own summary is blunt: “The downturn is no longer confined to Sydney and Melbourne, as cumulative demand-side pressures pulled previously resilient mid-sized capitals into negative territory.”

Three features distinguish July from June:

1. Depth. At −0.7%, July nearly doubled June's fall. December 2022 (−1.1%) remains the modern benchmark for a bad month, but July is now the closest any month has come since. By our estimate the national index sits about 1.4% below its March 2026 peak — a figure we derive by compounding the published monthly changes, so treat it as approximate rather than a Cotality-stated number.
2. Breadth. In the June release as first published, the fallers were Sydney, Melbourne and Canberra. In July they are joined by Brisbane and Adelaide, the regions have turned, and Hobart's gain has faded to +0.1%. Only Darwin (+0.8%) posted a meaningful rise.
3. Acceleration in the leaders. Sydney's monthly fall deepened from −1.2% (June, as published) to −1.4%, and its quarterly decline reached −4.0%. Melbourne deepened to −1.2% monthly and −3.4% quarterly. Both are now in outright annual decline — Sydney −2.0%, Melbourne −2.8% — which means a buyer who purchased a year ago in either city is behind on paper before transaction costs.

One point of precision on the peaks: Sydney's index peaked in January 2026 and Melbourne's most recent peak was November 2025. Melbourne's all-time high remains March 2022 — it never fully retook that level in the 2024–26 upswing, so its current decline compounds an already long stretch of underperformance rather than interrupting a record run.

Brisbane and Adelaide Join the Downturn

Brisbane's turn is the more significant of the two. Through 2024 and 2025 it was the archetypal beneficiary of the affordability rotation: strong interstate migration, an undersupplied rental market and a median that — until it crossed $1.1M — undercut Sydney's by enough to keep attracting displaced demand. That last clause is the problem. At a median of $1,104,094, Brisbane is no longer a cheap alternative to anywhere. The same borrowing-capacity ceiling that capped Sydney at a 4.35% cash rate now binds in Brisbane, and its quarterly figure (−0.6%) shows the momentum loss is established rather than a one-month blip.

Adelaide's decline is shallower — −0.2% monthly, and its quarter is still marginally positive at +0.1% — but the direction matters more than the magnitude. Adelaide was the last mainland capital still grinding higher through every wobble of the past two years. Its stall in June (later revised to a fall) and its outright July decline are consistent with the affordability tailwind that carried the mid-sized capitals finally exhausting, exactly the sequence the June data hinted at.

Our analysis: the annual columns are now the most misleading numbers in the release for these two cities. An investor screening markets on 12-month growth would rank Brisbane (+14.8%) and Adelaide (+10.5%) among the country's strongest; the monthly and quarterly columns show both are already falling. In a turning market, always weight the shortest reliable window.

The Regions Turn for the First Time in Three and a Half Years

Through the first half of 2026, regional Australia was the ballast in the national number: as recently as the June release, combined regionals were still rising while the capitals fell. That defensive rotation — priced-out buyers moving down the cost curve into regional markets — appears to have run its course along the east coast. The pattern within the regional aggregate mirrors the capital-city pattern almost exactly: the regions attached to falling capitals (NSW, Victoria, Queensland) are now falling, while the regions attached to the still-firm western and southern markets (WA, SA) are still rising, and rising strongly in regional SA's case (+1.4% was the strongest print anywhere in the country in July).

That symmetry is informative. It points to a downturn transmitted through borrowing capacity and confidence — forces that operate on whole state economies — rather than through anything specific to capital-city stock. When Sydney money stopped flowing into the Hunter and Illawarra at the same time Sydney itself was falling, the regional NSW print followed within months.

For the July vacancy read that will test the regional rental story, SQM's print lands mid-August; our tracker coverage will pick it up in the next cycle. As at June, national vacancy was 1.3% on SQM's measure — regional rental markets remain tight even where prices have turned.

The Tier Split: Borrowing Capacity Is Setting Price Discovery

A 3.5-percentage-point quarterly gap between the top and bottom quartiles of the same national market is unusual, and it does more to explain July than any city-level number. Three mechanisms are consistent with it:

1. Borrowing capacity binds hardest where loans are largest. At a 4.35% cash rate, the marginal buyer of an upper-quartile property has lost far more absolute purchasing power than the marginal buyer of a lower-quartile one. Premium price discovery now happens between buyers who cannot bid what identical buyers bid a year ago — so prices adjust down to meet the new maximum loan.
2. Policy supports are concentrated at the bottom. The expanded 5% deposit scheme and state first-home-buyer concessions operate almost entirely below the median. That demand is price-capped by design, so it pools in the lower quartile and puts a floor under exactly the stock the schemes target.
3. The investor exit is concentrated at the top. Investor selling ahead of the negative-gearing and CGT changes — enacted in June with a 12 May 2026 cut-off and effect from 1 July 2027 — is weighted toward higher-value, negatively geared stock, where the tax change bites hardest. Established dwellings bought after the cut-off fall under the new regime; the new-build carve-out points future investor demand away from the established premium segment altogether. Meanwhile, buyers priced out of the middle displace demand downward into the lower tier.

Domain's June-quarter suburb-level data made the same point in extreme form: Toorak values fell 26.6% year-on-year while Cabramatta rose 32.4%. Suburb-level figures that dramatic partly reflect thin sales and compositional noise, but the direction matches the quartile data exactly — the premium end falls while the affordable end rises, within the same metropolitan market.

Our analysis: this is what it looks like when credit, rather than sentiment, is the binding constraint. Sentiment-driven downturns tend to hit everything roughly proportionally; credit-capacity downturns hit in proportion to loan size. The tier split also has a practical screening implication — the segment an investor buys into now matters more than the city, a point our units vs houses analysis reached from the dwelling-type angle: cheaper unit markets have consistently out-held expensive house markets through this phase.

Perth: The Last Capital Standing, With an Asterisk

The revision deserves more attention than the July print. Cotality's index is calculated daily from a settlement pipeline that takes weeks to fill; early monthly estimates for thinner, faster-moving markets carry more uncertainty and get revised as settlements land. A 120-basis-point revision is large — large enough to flip June Perth's sign from the strongest mainland gain to an outright fall, and to change the June narrative retrospectively: on revised data, Perth joined the downturn a month before anyone reported it.

There is a data-literacy lesson here worth internalising beyond this cycle:

• First prints are provisional. The figures in any HVI release are best estimates that firm up over roughly the following quarter. Small markets and turning points — precisely the conditions in Perth now — are where revisions run largest.
• Cross-check sign disagreements. PropTrack's July index has Perth at −0.2% while Cotality has +0.1%. When two independent indices disagree on a market's direction, the honest read is “approximately flat, direction unconfirmed” — not whichever sign suits the narrative.
• Revisions cut both ways. June's national −0.4% and July's −0.7% are themselves subject to refinement. The trend across multiple months and multiple sources is the reliable object; any single cell in the table is not.

None of this makes Perth weak in the way Sydney is weak. Its annual growth (+20.5%) is the nation's strongest, its median ($1,029,797) has held above $1M, and WA's economy and migration flows remain supportive — the same state-level strength showing up in regional WA's +0.9%. But a market whose last two months on revised data read −0.5% and +0.1%, with a negative quarter and a cross-index sign dispute, is a market at stall speed. The gap between Perth's annual figure and its monthly reality is now the widest in the country.

Cross-Check: What PropTrack Says

PropTrack's national median sits at $894,000 with annual growth of +3.9%, against Cotality's $928,421 median — the usual methodology gap between Cotality's hedonic valuation base and PropTrack's listings-ecosystem model. The July magnitude difference (−0.3% versus −0.7%) is wider than the 20–40 basis points the two indices have typically been apart in recent prints, on our reading of the series, but the direction, the breadth and the leaders (Sydney and Melbourne) all match. The notable disagreement is Perth, covered above.

We publish a full companion analysis of the PropTrack release, including the index-divergence question and what each methodology catches that the other misses, in PropTrack Home Price Index July 2026: Investor Analysis — we keep the cross-check short here rather than duplicate it.

The Macro Backdrop: Inflation Progress Without a 2026 Cut

The rate picture entering August is cleaner than it was a month ago, in one specific sense: the hike risk has largely been priced out. Westpac has scrapped its 4.85% peak-rate call, and the major-bank consensus has converged on an extended hold. For housing, that converts the bear scenario we sketched in the June analysis — an inflation-forced hike triggering 2022-scale falls — from a live tail risk into a remote one. What remains is the grind scenario: a restrictive 4.35% capping borrowing capacity for at least another two quarters, with consensus seeing no easing before 2027. Our full read of the inflation data is in ABS June-Quarter CPI: Inflation at 3.8% and the August RBA Meeting.

The higher-frequency indicators sketch the same broadening the price data shows, with one interesting exception:

• Auction clearances: 53.6% across the combined capitals for the week ending 2 August (Cotality) — soft, but firmer than the low-40s readings we covered in the June analysis.
• Sydney cleared below 50%, with 90 auctions withdrawn. Withdrawn auctions count as unsold in the clearance calculation, so the weak headline rate partly reflects vendors pulling stock rather than discounting to meet the market — a sign of thin conviction on both sides rather than forced selling.
• Melbourne cleared 59.6%, its firmest result since April. A single week is not a trend, but it is consistent with Melbourne's deeper discount — median $797,354, the cheapest mainland east-coast capital and still below its March 2022 high — beginning to find price-sensitive buyers.
• Rental markets stay tight. SQM's June national vacancy was 1.3%, and gross rental yields reached 3.50% across the combined capitals in July, up from December's 3.34% low. Values falling while rents hold keeps rebuilding the income case underneath the price weakness.

For the week-by-week feed of these indicators, see our market week in review.

What Broadening Means for Each Investor Profile

If you are buying. The negotiating leverage that was confined to Sydney and Melbourne in June now extends to Brisbane, Adelaide and the east-coast regions, and it is strongest in the upper quartile (−3.2% in a quarter). The discipline is unchanged: anchor to recent comparable sales, which already embed the falls, rather than asking prices, which lag them. The trade-off has shifted, though — with only about a 4% chance of an August cut and no consensus easing before 2027, there is little urgency premium. Patience is cheap while the market is still finding its level, and the falling-knife risk is lowest in the lower quartile, where scheme-supported demand has held prices positive.

If you are holding in Sydney or Melbourne. Both cities are now negative year-on-year and falling at more than 1% a month. The mitigants are the same as in June, and they are real: yields are expanding, vacancies are tight, the enacted reform grandfathers existing holdings, and no forced-selling signal has appeared. Selling into a 53.6%-clearance market crystallises the fall; holding collects rising rents while the rate cycle turns. The exception is a holder of upper-quartile stock with a thin buffer — that segment is falling fastest, and stress-testing serviceability at current rates is the priority.

If you are holding in Brisbane, Adelaide or Perth. The task is expectation-setting. The +10% to +20% annual figures on your statement describe the year behind you; the monthly data describes flat-to-falling markets ahead. Plans that depended on continued double-digit growth — equity releases, staged acquisitions — should be re-run at 0% near-term growth. Nothing in the data argues for selling a performing, positively yielding asset into a softening market.

If you are yield-focused or running an SMSF. The arithmetic keeps improving: 3.50% combined-capital yields and rising, 1.3% vacancy, softer entry prices each month. One hard deadline overrides the patience argument for a specific cohort: the residential SMSF limited-recourse borrowing ban commences around 10 August 2026, and any fund intending to enter a compliant LRBA arrangement is now inside the final week. Our SMSF LRBA deadline checklist covers the mechanics. For funds buying outright, the broadened downturn simply extends the buyer's window.

What Would Mark the Floor

Watching for the turn is more useful than predicting its date. The signals we will track through the rest of 2026, roughly in the order they should appear:

1. The rate path. This remains the master variable. The downturn is a borrowing-capacity phenomenon at a held 4.35% rate; the first credible signal of 2027 cuts lifts capacity and sentiment together. The trimmed mean falling toward 3% over the next two quarterly CPI prints is the precondition — on the current data calendar, the RBA's November meeting, with the September-quarter CPI in hand, looks like the next genuine decision point.
2. Clearance rates. Melbourne's 59.6% is the kind of print that, sustained for a month across more than one city, has historically preceded price stabilisation by a quarter or so. One week proves nothing; four consecutive weeks above the mid-50s would.
3. Listings behaviour. Sydney's 90 withdrawals cut both ways — weak current demand, but also vendors with the balance sheets to wait rather than discount. A downturn that ends with stock withdrawn, rather than cleared at lower prices, tends to trough shallower. A rise in distressed listings would signal the opposite; none is visible yet.
4. Tier convergence. The upper quartile turned first; it should also bottom first. When the premium tier's quarterly decline starts narrowing from −3.2% while the lower tier stays positive, the repricing to current borrowing capacity is nearing completion.
5. The revision pattern. If Cotality's revisions start landing upward rather than downward — the opposite of Perth's June experience — early prints are undershooting the market's true level, which is characteristic of the months around a floor.

History suggests the window between the first credible cut signal and the price trough is short — and can even run in reverse. In 2019, prices stabilised within months of the rate outlook turning; in 2023, values bottomed in the opening months of the year while the RBA was still hiking, once buyers judged the peak was near. In both episodes, on our reading, the deepest discounts went to buyers who moved while sentiment was still poor.

The Outlook: What the Forecasters Expect

Two observations on how July's print interacts with those numbers.

First, the mid-sized-capital forecasts now carry the most risk. Domain's Brisbane, Adelaide and Perth ranges were struck before those markets' monthly prints turned negative or flat. Reaching +3–9% over FY27 from here requires the current falls to reverse within a quarter or two — possible if 2027 cuts arrive on schedule, but the forecasts embed that recovery rather than the present trend. The Sydney and Melbourne ranges, by contrast, merely require the current pace of decline to continue and then moderate, which is a lower bar.

Second, the spread between houses matters less than the shared assumption. Domain, ANZ and CBA all key the recovery to RBA easing in 2027. That makes every one of these forecasts, in effect, a rates call wearing a housing costume — and it means the quarterly CPI prints between now and February are the real forecast updates. Our own scenario framework from the June analysis stands, with the bear case (an inflation-forced hike) now priced as remote and the base case — a grind of negative national prints into 2027 — tracking to script, though July's breadth ran ahead of what we expected a month ago.

What Would Invalidate This Analysis

• Upward revisions on the scale of Perth's June revision. If next month's release revises July's breadth away — Brisbane or Adelaide back to flat, the regionals positive — the “broadening” thesis weakens to “Sydney and Melbourne plus noise.” We rate this unlikely given PropTrack independently shows the same breadth, but July's own revision history counsels humility.
• An RBA surprise on 11 August. Markets price ~4% for a cut (as at 3 August). An actual cut would reset borrowing capacity and sentiment immediately and date this analysis within a week.
• A lower-tier crack. The thesis holds that scheme-supported demand floors the lower quartile. If lower-tier values turn negative while the schemes remain in place, the downturn is deeper than a borrowing-capacity story and the “affordable end holds” framing fails.
• A forced-selling signal. Rising mortgagee or distressed listings would convert an orderly repricing into a genuine correction. None is visible in the July data.
• A labour-market break. Unemployment rising materially would add an income shock to the borrowing-capacity squeeze — the scenario in which the 2022 comparison stops flattering 2026.

Methodology and Data Notes

The Bottom Line

• July 2026 is the month the downturn stopped being a two-city story. Five of eight capitals fell, the regions declined for the first time since January 2023, and the national fall (−0.7%) was the steepest since December 2022 — the second month in a row to claim that title.
• The tier split is the release's sharpest signal. Upper-quartile values down 3.2% in three months against a lower tier up 0.3% says borrowing capacity is setting prices — segment selection now matters more than city selection.
• Perth's asterisk is a lesson, not a footnote. A 120-basis-point downward revision flipped June Perth negative after the fact. First prints are provisional; trends across months and sources are the reliable object.
• The macro offers patience, not rescue. Trimmed mean at 3.6%, a ~4% August cut probability (as at 3 August) and no consensus easing before 2027 mean the borrowing-capacity cap stays on through year-end. The hike tail risk, at least, has largely gone.
• The income side keeps compounding in investors' favour. Yields at 3.50% and rising against 1.3% vacancy make this a progressively better entry environment for cash-flow-led buyers — while the annual growth figures in the north and west describe a past that the monthly data has already left behind.
• What to watch: the 11 August RBA statement's tone, whether Melbourne's 59.6% clearance week repeats, SQM's July vacancy print mid-month, and whether next month's revisions confirm or soften July's breadth.