Home prices in Australia's capital cities have begun to fall. The median capital-city price dropped in May, the first decline since January 2025, as high interest rates and inflation squeezed buyer budgets. Auction success rates hit a new low for the year.
A broad slump now appears underway. Experts predict the downturn could persist for at least 12 months and erase as much as 10% from property values. The decline is concentrated in Sydney, Melbourne, and Canberra, where median house prices ended May below their levels at the close of 2025.
Data provider Cotality reported the May fall on Monday. It described buyers abandoning auctions across the largest markets. The drop follows a period of relative stability after earlier rate hikes cooled a pandemic-era boom.
The slide reflects persistent pressure from elevated borrowing costs and ongoing inflation. Household budgets remain stretched, reducing demand even as supply remains constrained. Further rate decisions from the Reserve Bank will be closely watched.
Some analysts caution that a sharp correction could destabilize household wealth. But others argue the downturn may prove shallow if the labor market stays strong and immigration supports long-term demand.