The housing market is continuing to weaken across the broader national market with Sydney and Melbourne leading the downturn in prices, according to Cotality’s (formerly CoreLogic) national Home Value in Index for May.
Prices have fallen by 0.9% and 0.8% in Sydney and Melbourne respectively over the month of May. Similarly, though less dramatic, Canberra prices have fallen 0.2%.
This is despite values continuing to rise across the other capitals but it’s very clear that growth is slowing here as well. Perth and Darwin still lead with monthly gains of 1.5%, followed by Brisbane and Hobart at 0.9%, with Adelaide at 0.5%.
The lower price tier suburbs are proving to be more resilient than the more expensive suburbs as we wrote about previously. That doesn’t mean they are safe from the overall slowdown of the market as demand dries up.
The largest drop in estimated sales has been recorded in Sydney and Melbourne which are down 17.0% and 14.2% compared to a year ago. Nationally, the estimated home sales for Q1 2026 are 2.2% lower than a year ago and 4.1% below the five-year average.
Regional markets are still solid with housing values rising 0.6% nationally in May, but they are still slowing. This is the smallest monthly rise in the year to date. Regional Western Australia led gains at 1.9% while trailing at the back is NSW at 0.2%.
Rents keep on rising as well. 0.6% in May, which is down from the 0.7% of monthly gains seen in the first three months of 2026 but still pushes the annual national rent growth to 5.9%. This is the largest annual increase in almost two years.
This upward pressure on rents is unlikely to stop any time soon with vacancy rates remaining very low. It sat at 1.5% in May, the same as the record lows seen in 2022 and 2023 when Australia opened up after the pandemic.
However, it’s likely that renters are being pushed to the upper limit of what they can afford. The cost of rent has increased by $204 per week over the past five years accounting for around a third of renter’s pre-tax income. Gross rental yield sits at 3.45% across the combined capitals, the highest it’s been since June 2025.
The current market is getting tougher. We’ve had several increases to the cash rate, the most recent bringing us to 4.35%, while consumer sentiment remains deeply negative with cost-of-living pressures squeezing household budgets.
On top of the growing pessimism, you’ve got the major changes included in the Federal Budget that will likely reduce investor demand from near-record highs.
Mix all of this together and you’ve got value growth easing, home sales trending lower, and selling conditions starting to favour buyers (depending on the market).
The housing market isn’t about to jump off a cliff thanks to consistent constrained supply, but it does mean that things will be more subdued.
Whether buying, selling, or investing the right advice matters more than ever in a shifting property market. Get in touch with the property experts at It’s Simple today for a free, no-obligation chat.
This article is intended for general informational purposes only and does not constitute financial, investment, or mortgage advice. The information provided is based on publicly available data and market trends at the time of publication. Individual circumstances vary — please consult a licensed mortgage broker or financial adviser before making any property or investment decisions.