Australian Housing Price Decline Scenarios by Major City

Decline Magnitude and Buffer Capacity by City

Property data firm Corelogic analyzed the impact on major cities under four housing price decline scenarios of 5%, 10%, 15%, and 20%. Melbourne has relatively limited buffer capacity as growth momentum slowed after reaching a peak price of $840,000 in November 2025. Corelogic Research Director Eliza Owen stated that a decline exceeding 10% in Melbourne would push prices back to pre-pandemic levels.

Perth, Brisbane, and Adelaide have secured greater buffer capacity against declines due to strong appreciation over the past five years. Owen explained that even if Perth declined 20% from peak prices, the median house price would remain around April 2025 levels.

Current Market Conditions and 2027 Outlook

According to ANZ bank modeling, housing prices are expected to fall 4.3% this year and 3.4% in 2027. Sydney is projected to decline 14.5% from peak and Melbourne 12.8%. ANZ economists Madeline Dunk and Adam Boyton noted that since their June forecast, the housing market has weakened more than anticipated, with Sydney and Melbourne prices falling beyond projections and Brisbane and Perth beginning to decline earlier than expected.

Auction clearance rates falling below 50% in Sydney and Melbourne are key indicators showing market weakness. Historically, clearance rates below 50% have been associated with price declines.

PRD Chief Economist Diaswati Mardiasmo said a 5% decline is more realistic at present, as inflation has been falling monthly since March. She assessed a 20% decline as excessive, stating it would require a Global Financial Crisis-level situation.

Central Bank Position and Interest Rate Outlook

RBA Governor Michelle Bullock emphasized that while the board is monitoring the fallout from housing market declines, this is not the focus of future interest rate decisions. Bullock stated that excess capacity, tight labor markets, Middle East conflicts, and the AI boom are more important as risk factors related to inflation outlook.

The RBA sees housing prices declining gradually over a period in its recent economic outlook. Financial markets view a 60% probability that the RBA will implement an additional 0.25 percentage point rate increase by year-end, which would bring the cash rate to 4.6%.

Source: ABC News