Australia’s Housing Market Slides 5% as NAB Slashes Forecast; Buyers Freeze

Australia’s housing market is contracting faster than expected. National Australia Bank slashed its 2026 forecast to a 5% nationwide price decline on Tuesday, more than double its July prediction of 2%. Sydney and Melbourne face the sharpest corrections, with 10% and 9% falls forecast respectively. Despite better buying conditions, potential buyers are freezing, with auction bidders dropping below two per property and open home attendance halving. The shift reflects rising interest rates, federal tax changes on investment properties, and widespread fear that prices will fall further.

NAB’s dramatic downgrade signals deeper downturn

National Australia Bank released its August housing monitor on Tuesday, revising forecasts sharply downward. Capital city prices are now expected to fall 5% across 2026, compared to the 2% decline NAB predicted just one month earlier. Sydney property values are forecast to plunge 10%, with Melbourne falling 9%. Brisbane’s expected growth has collapsed to 2% from an earlier forecast of 9%, while Perth slows to 5% growth from 14%. The bank cited softer-than-expected outcomes in Sydney and Melbourne over recent months and much sharper declines than anticipated.

Buyers vanish despite a market tilted in their favour

Auction clearance rates have fallen below the 60% level considered balanced between buyers and sellers. Ray White data shows average active bidders per auction have plunged below two, down from around three for most of last year. Open home attendance has also halved to about two potential buyers on average, compared with three to four in stronger markets. Buyers are hesitant to commit while interest rates remain elevated, prices drop, and tax treatment of investment properties changes. Cate Bakos, chair of Property Investment Professionals of Australia, said buyers have “way better conditions” but remain “so scaredy-cat,” sitting back and waiting for lower prices later in the year.

Sellers flood market as prices fall 2.5% from peak

Property listings surged more than 12% in July to 278,984 homes, the highest level in over a year, defying the usual winter slowdown. National listings are now 22% higher than a year ago. Residential property prices across Australia’s eight capital cities have fallen 2.5% from their March peak, with Sydney and Melbourne down 5.6% and 5.7% respectively. SQM Research managing director Louis Christopher said the surge reflects vendors rushing to sell before prices slide further. KPMG now forecasts national house values will fall 1.1% over calendar 2026, a significant downward revision from its previous outlook. Sellers are also shifting away from auctions toward private treaty sales, which are typically used in downturns.

Tax changes and rate rises fuel the correction

The downturn stems from three consecutive Reserve Bank rate rises this year, persistent domestic inflation, and federal Budget changes to capital gains and negative gearing treatment announced in May. These tax changes have weighed heavily on investor sentiment. ANZ’s latest analysis shows capital city housing prices are down 9.6% on a three-month annualised basis. Westpac’s head of Australian macro-forecasting Matthew Hassan said the correction is no longer confined to Sydney and Melbourne, with a broadening and deepening price correction now evident in Brisbane and Perth.

Final Thoughts

Australia’s housing downturn is accelerating faster than banks predicted just weeks ago. With NAB forecasting a 5% national decline and Sydney facing a 10% drop, property owners face sustained weakness through 2026. Buyers sitting on the sidelines hoping for lower prices may face a longer wait than expected.

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