Since our Winter Report, the macro backdrop has stabilised, just at a more restrictive setting than the market had grown used to. The RBA left the cash rate on hold at 4.35% at its August meeting, having lifted it three times earlier in the year, and Governor Michele Bullock signalled the Board is now watching incoming data rather than actively tightening. Inflation has continued to ease: the ABS reports headline CPI at 3.5% in the year to July, down from 3.8% in June, while trimmed mean inflation, the RBA’s preferred measure, has held at 3.6%, still above the 2–3% target band.

Confidence has lifted from Winter’s lows but remains fragile. The Westpac–Melbourne Institute Consumer Sentiment Index rose 6% in August to 88.9, from 83.9 in July, as mortgage holders responded to the RBA’s decision to hold rates. Pessimists, however, still outnumber optimists, and sentiment remains well below year-ago levels. The labour market has continued to soften: unemployment rose to 4.5% in July, the highest level of the post-COVID era, with the RBA now forecasting it will climb toward 4.7–4.8% by mid-2028.

The changes to negative gearing and capital gains tax that were only proposed at the time of our Winter Report are proposals no longer, they are now law. From 1 July 2027, negative gearing will be limited to new residential builds, and the 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax rate on capital gains. Properties held before Budget night, 12 May 2026, remain grandfathered under the existing rules. Asked whether the government’s reforms had deepened the downturn, Cotality’s Tim Lawless was direct: the slump began before the Budget and before rates started rising, but the tax changes have “absolutely” accelerated it.

For housing, the message has sharpened since Winter. This is no longer a market carried by momentum in some places and slowing in others, it is a market in broad retreat. Demand has not disappeared however: population growth and rental tightness continue to provide structural support, and mortgage arrears remain low, which is a sign of a slowing market rather than a distressed one. But confidence, the cost of finance and now-legislated tax settings have combined to give buyers meaningfully more leverage than they had even three months ago. In this environment, quality, location, presentation and realistic pricing matter more than ever.

National Price Growth: a market recalibrating, over five months

National values are now falling outright, and the pace of decline has quickened through Winter. Cotality’s data to 31 July 2026 showed the combined capital cities down 2.5% over the quarter and up just 3.9% over the year, with a combined capital city median dwelling value of $1,010,814; combined regional markets remained comparatively resilient, down just 0.1% over the quarter and still up 9.7% over the year, with a median of $769,867. The national median dwelling value stood at $928,421 at the end of July, before August’s further 0.9% fall took the market to a fifth straight month of decline and 3.6% below the March peak.

The pattern that defined Winter, broad strength in the mid-sized capitals offsetting softness in Sydney and Melbourne, has now broken down. Perth, Brisbane and Adelaide have each rolled over from their earlier peaks and joined the downturn, while only Darwin remains close to its high. Cotality notes that quarterly home sales are now tracking 15.5% lower than a year ago and 11.5% below the five-year average, with Brisbane, Perth and Sydney all recording estimated sales volumes down more than 20% year-on-year, a sign that the slowdown is now as much about buyer withdrawal as it is about price.

Rolling quarterly capital city annualised price growth (quarterly change to 31 July 2026, annualised) is as follows:

• Darwin 9.6% annualised, 2.4% over the quarter – still the standout, though momentum has slowed from Winter’s extraordinary pace
• Hobart 5.6% annualised, 1.4% over the quarter – the most resilient major market outside Darwin
• Adelaide 0.4% annualised, 0.1% over the quarter – effectively flat, having eased sharply from Winter’s double-digit pace
• Perth -1.2% annualised, -0.3% over the quarter – the multi-year boom has finally lost steam, following a weakest-since-April-2020 result in June
• Brisbane -2.4% annualised, -0.6% over the quarter – a second consecutive monthly decline
• Canberra -5.2% annualised, -1.3% over the quarter – a fourth straight month of falls
• Melbourne -13.6% annualised, -3.4% over the quarter – now recording its first annual decline of the cycle
• Sydney -16.0% annualised, -4.0% over the quarter – the country’s largest and most expensive market continues to lead the correction, now 7.1% below its February peak

Six months ago, Perth, Brisbane, Adelaide and Darwin were all at peak and rising strongly; today only Darwin remains close to its high, while Perth, Brisbane and Adelaide have joined Sydney, Melbourne and Canberra in decline. Sydney remains most exposed to affordability and borrowing-capacity constraints.

Melbourne’s story is different again, already Australia’s best-value major capital on a dwelling-median basis, this Spring Melbourne will continue to be driven by low confidence, state-based taxation, state election and a broader perception that Victoria’s investment settings are less attractive than other states. That, as we set out below, is also where the opportunity now lies.

Melbourne’s Winter softness has become a more sustained decline. Cotality’s July data showed Melbourne dwelling values down 1.2% over the month, 3.4% over the quarter and 2.8% over the year, its first annual decline of this cycle with a median dwelling value of $797,354. August brought a further 1.1% monthly fall. Melbourne is now running around 5.5% below its March 2022 peak, having been just 2.3% below that peak at the time of our Winter Report.

On the ground, the bifurcation we described in Winter has continued, and if anything intensified. Premium family homes with strong land, light, school access, amenity and turnkey presentation continue to attract genuine competition, particularly in blue-chip areas such as Stonnington and Boroondara. Building and renovation costs remain prohibitive, which continues to support demand for well-finished homes where buyers can avoid construction risk. By contrast, compromised, overcapitalised or poorly presented homes are meeting real resistance.

Supply and demand have moved further apart since Winter. Total advertised stock remains above the five-year average in Sydney, Melbourne and Canberra, while higher-than-normal listing volumes are now emerging in markets that were tightly held only months ago, including Brisbane and Adelaide.

Abercrombys is observing a slower rate of absorption across the market, reflected in longer selling times, greater vendor discounting and persistently low auction clearance rates. While these conditions favour buyers, many remain cautious and lack the confidence to transact.

Buyer engagement has softened across parts of the market in which Abercrombys operates, with lower average attendance at open homes in the luxury apartment sector and the $2–$5 million family home market compared with the same period last year. Encouragingly, this has not translated into widespread forced selling. Fewer vendors are choosing to come to market as buyer activity slows, while mortgage arrears remain relatively low, suggesting limited financial distress among owners.

There have, however, been some notable exceptions. Generational homes in Melbourne’s premium suburbs continue to attract strong interest from the next generation of families seeking significant homes on substantial landholdings.

In practical terms, well-presented, appropriately priced quality homes are still selling. However, buyers now have far greater capacity to compare, delay and negotiate than they did in Winter. Properties that are poorly presented, overpriced or compromised are increasingly exposed.

For vendors, the Spring market will reward discipline, preparation and credible pricing more than at any other point in this cycle. For buyers, it offers considerably greater choice and negotiating power than was available six months ago.

Rental conditions remain tight, but Spring has brought the first genuine signs of easing since this cycle began. Cotality reports the national rental vacancy rate rose to 1.9% in August, its highest reading since January 2025, up from 1.6% at the time of our Winter Report. National rents grew 5.7% over the year to August, a slight moderation from the 5.9% pace recorded over the prior three months.

This is an important, if modest, shift. Even as rental growth moderates, supply remains structurally constrained and vacancy rates sit well below the pre-pandemic decade average of around 3.3%, so this should be read as an easing of pressure rather than an end to the shortage. For investors, the calculus has also changed materially now that the tax reforms are law rather than merely proposed. Higher debt costs, higher Victorian land tax, insurance and maintenance costs, and the now-confirmed restriction of negative gearing to new builds from 1 July 2027 all challenge the after-tax returns on established investment property, while the changes are specifically designed to redirect investor demand toward new builds.

Cotality also notes that yields remain below the cost of debt in most capitals, even before holding costs are included. For investors, this remains a market for assets with enduring tenant appeal, land value, infrastructure support and limited future supply competition, rather than indiscriminate acquisition. In Victoria specifically, investors will need to weigh cash flow, land tax exposure and the practical effect of the now-legislated federal tax settings.