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Capital city house prices tipped to fall 10% as downturn deepens
Capital city house prices could fall more than 10 per cent throughout the downturn as a big four bank revises its forecast down, with the major cities to record steep declines before a likely recovery.
Australia and New Zealand Banking Group (ANZ Bank) has delivered a major downgrade to house price predictions, forecasting falls of more than 10 per cent nationally and 14 per cent in Sydney.
In a report released on Tuesday, the major bank said it now projected a total decline of 10.6 per cent overall across the capital cities, with the trough predicted in 2027 before recovering over the second half of the year.
The bank estimated a total decline of 4.3 per cent over the remainder of 2026, a larger fall from the 2.1 per cent it predicted in June, and revised its forecast for next year to 3.4 per cent, from 3.3 per cent.
It came after Cotality’s latest Home Value Index for July showed national home values fell by 0.7 per cent, the largest single-month decline since December 2022.
Additionally, ANZ said it believed Sydney house prices will fall as much as 14.5 per cent from peak to trough, while Melbourne prices may drop 12.8 per cent throughout the downturn.
According to Cotality, Sydney and Melbourne have continued to lead the downturn, with home values dropping by 1.4 per cent and 1.2 per cent respectively over the month.
ANZ’s head of Australian economics, Adam Boyton, and economist Madeline Dunk, said there would be bigger declines across the major capitals than originally anticipated, while prices in Brisbane and Perth were falling earlier than expected.
They said that the recent interest rates, tax policy changes and global uncertainty had dampened sentiment in the market.
“Given the broader supply backdrop, and the capacity constraints in the construction sector, we think it is hard to see housing prices falling for an extended period,” they said.
“Through the second half of 2027 we expect dwelling prices to start recovering, supported by 50 basis points of rate cuts from the RBA. This should see capital city housing prices rise by 4.3 per cent in 2028.”
ANZ’s prediction followed National Australia Bank (NAB) estimating that Melbourne and Sydney’s dwelling prices could fall by a total of 10 per cent from their peak before a possible recovery in late 2027.
The bank’s Housing Monitor August 2026 showed that recent dwelling value data had indicated likely steeper falls than initially forecast.
When it came to the combined capitals, NAB formally revised its outlook, predicting the eight cities would fall 5 per cent in the rest of 2026, instead of the 2 per cent decline previously expected.
Additionally, it predicted 2–4 per cent declines across the mid-sized capitals, estimating a recovery would come in 2027.
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