Australian Regional Housing Values Fall 0.1% as Downturn Spreads Beyond Cities

Australia’s regional housing market has entered a new phase of decline. Cotality’s latest quarterly update found regional dwelling values fell 0.1% in the three months to July 2026, compared to a 2.5% drop across capital cities. Of the 50 largest non-capital regional markets examined, 22 recorded outright declines and 47 showed slower growth. This marks the end of a five-year boom that saw some regions gain 30%.

How far the downturn has spread

Regional NSW and Victoria recorded the weakest conditions nationally, mirroring softness in Sydney and Melbourne. Cotality examined Australia’s 50 largest non-capital regional markets and found 47 had experienced slower growth compared with the previous quarter. Twenty-two recorded an outright decline in dwelling values. The shift shows that regional markets have consistently outperformed capital cities since housing conditions began to soften in late 2025, but even the regional markets are now being impacted by the broader market slowdown, according to Cotality Australia Head of Research Gerard Burg.

Lifestyle markets feeling the sharpest pullback

Premium coastal zones like the Mornington Peninsula and Central Coast of NSW are recording larger falls than more affordable inland centres. These markets attracted buyers chasing lifestyle, not just lower entry prices, and those buyers have more discretionary room to delay when confidence sours. Affordable regional markets remain more resilient, with buyers priced out of capitals still moving to cheaper regions where the value proposition remains intact, even as borrowing capacity tightens.

What’s driving the slowdown

The RBA raised rates three times this year before holding at 4.35 per cent. Each hike reduced what buyers could borrow and delayed decisions as households waited to see if rates would peak. Properties now sit on the market longer, and buyers who remain active have more negotiating room than they did 12 months ago. Interest rate rises and tax changes have taken many investors out of the market, compounding the slowdown across both regional and capital-city properties.

Buying opportunity in some regions

Duncan Hill, founder of Duncan Hill Property in Bowral, NSW, says the Southern Highlands has become a prime buyer’s market. Regional dwellings in the area grew about 30% over the last five years but have declined 2 to 3% over the last 12 months. Hill told SBS News that “it’s probably the best time that I’ve seen in the last five years” for buyers seeking a tree-change property. Relative affordability continues to attract buyers to many regional markets and support internal migration from the capitals, though softer buyer demand is becoming more evident across the country.

Final Thoughts

Regional Australia’s housing downturn signals a broader shift in buyer behaviour and confidence. With 22 of 50 major regional markets now recording price declines, the five-year boom has ended. Buyers in premium lifestyle zones face steeper falls, while affordable regions remain more resilient.

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