The broad slowdown in the national housing market continued over the past month and, with further interest rate increases looking increasingly likely, that slowdown could broaden and accelerate from here.
The latest inflation data showed that the annual rate of headline inflation was 3.5 per cent and the annual rate of underlying inflation was 3.6 per cent. Although headline inflation slowed relative to the previous month and underlying inflation remained steady, both remain well outside of the RBA target, and both were stronger than anticipated, heightening the likelihood of further interest rate increases.
Another reason why interest rates may have to rise is that economic growth was stronger than expected and productivity gains remain elusive. The latest data for June 2026 showed that economic growth was 0.4 per cent higher over the quarter and 2.1 per cent higher over the year, with the annual growth higher than the latest forecasts from the RBA, which were made just a month ago at 1.9 per cent.
Meanwhile, GDP per hour worked, which is a measure of productivity, was unchanged over the year. In fact, productivity is essentially where it was a decade ago. With productivity growth non-existent, the economy has limits on how quickly it can grow without generating inflation.
The labour market remains tight, but over recent months both the unemployment rate and the underemployment rate have been drifting higher. This reflects a slower rate of growth in employment and more of the employment growth occurring in part-time roles rather than full-time ones.
Over the past few months, reads on consumer sentiment, business confidence and business conditions have all weakened, with consumer sentiment and business confidence showing pessimism outweighing optimism and business conditions below long-term average levels. With the likelihood of further interest rate increases rising, it’s likely that pessimism will increase.
Although businesses and consumers are gloomy, spending data certainly doesn’t reflect this. Household spending is rising at a rate well above inflation, and discretionary spending growth is greater than non-discretionary. This data will be important to monitor, especially if further rate increases come to fruition.
The latest building approvals data showed that the number of dwellings approved for construction fell during the month but continued to rise on an annual basis. Even with annual approvals increasing, they continue to fall well short of the Housing Accord target. Higher interest rates and rising construction costs are likely to lead to fewer approvals and commencements over the coming months.
The downturn in the national housing market has continued to broaden, with declines now accelerating and spreading to more markets.
Cotality reports that national dwelling values were 0.9 per cent lower in August 2026, but what was most interesting was that the previous month’s 0.7 per cent fall was revised to a 1.2 per cent fall. I expect that the August number will be revised to reflect a larger decline too.
Over the month, every capital city except Darwin and every rest-of-state market except for SA and WA recorded a decline in values.
National dwelling values fell by 3.1 per cent over the three months to August 2026, with capital city values 3.7 per cent lower and regional values falling by 1.2 per cent.
Darwin was the only capital city in which values haven’t fallen over the past three months, and the rate of growth in that market has slowed. In the regional markets, only regional SA and regional Tasmania have avoided value falls over the three months.
It is important to recognise that the housing market was already slowing before the federal budget tax changes announcement. In fact, Sydney and Melbourne were already seeing values decline before interest rate increases, which started to slow the whole market.
Importantly though, since the federal budget announcement, declines in the housing market have broadened and accelerated, and that trend looks likely to continue, especially if interest rates are raised.
Along with falling dwelling values, there has been a significant fall in the number of transactions in the market. Cotality estimates that over the three months to August 2026 there were 14.6 per cent fewer sales than over the same three months of last year.
Transaction activity has seen a much greater decline in the capital cities than in the regional markets; however, falls are broad-based. Only Hobart and Canberra have recorded an increase in sales over the period relative to a year ago.
The latest property listing data from Cotality shows that new listings volumes are quite low, with 34,486 new listings over the past four weeks. New listing volumes are 3.1 per cent lower than a year ago and 6.4 per cent lower than the five-year average.
Across individual markets, the trends are much more varied, with capital city listings lower than a year ago and regional listings higher. But it is interesting to see new listings are much lower than a year ago in Sydney and Melbourne, suggesting the weaker conditions in the market are making vendors reconsider listing their properties. On the other hand, Adelaide, Perth and Darwin have seen double-digit percentage increases in new listings.
Although new listing volumes have slowed, total listings remain elevated with 139,167 properties for sale over the past four weeks which was 18.1 per cent higher than a year ago and 2.2 per cent above the five-year average.
Every capital city except for Hobart is seeing a higher volume of properties available for sale relative to a year ago, and only regional Tasmania and regional NT are seeing fewer total listings. Sydney, Melbourne and Canberra have historically high listing volumes, and although they aren’t at historic highs elsewhere, Brisbane and Perth have seen annual increases of more than 50 per cent, and Adelaide has seen an annual increase of more than 40 per cent.
The heightened volume of stock for sale at a time in which there are fewer active buyers in the market means that those who are buying have less urgency and more choice. In turn, this means that they have greater scope to negotiate on price, and there are many properties that will take a long time to sell in this market or simply won’t transact.
According to Cotality, the median time on market nationally over the three months to August 2026 was 39 days, which was up from 28 days over the same period last year. In the combined capital cities, median days on market has increased from 25 days to 37 days over the year, and regionally it has risen from 35 days to 45 days.
The capital cities with the longest days on market are Canberra, Sydney and Melbourne, and the lowest are in Perth, Adelaide and Darwin. Days On Market is higher in all capital cities relative to a year ago except for Darwin and Canberra.
In the regional areas, the longest median days on market are in NT, NSW and Victoria and the lowest are in WA, Queensland and Tasmania. Days On Market is higher compared to a year ago in Queensland, WA and Tasmania, is unchanged in NSW and NT and is lower elsewhere.
I expect that, with the ongoing elevated volume of stock for sale and reduced sales activity, median days on market will increase over the coming months.
The market is continuing to see that when properties sell for less than their original list price, the magnitude of the discount is increasing. Over the three months to August 2026, the median vendor discount was 4.0 per cent, up from 3.3 per cent over the same period last year. Properties selling in the capital cities have seen their discount increase from 3.0 per cent a year ago to 4.2 per cent currently, and in regional markets the discount is 3.8 per cent, up from 3.6 per cent a year ago.
The largest magnitude of discounting is being recorded in Sydney, Perth and Brisbane, with the smallest discounts in Hobart, regional Tasmania, Darwin and regional SA. Hobart is the only capital city where discounting has declined compared to a year ago, and regional areas in SA, Tasmania and the NT have also seen discounts decline.
With value declines set to continue, there is a strong likelihood that the magnitude of discounting by vendors will also increase.
The annual rate of rental growth has slowed from 5.9 per cent in July to 5.7 per cent in August 2026. Although the expectation is that the tax changes to investment will reduce rental stock and increase rents, there is no evidence of that as yet. Keep in mind though, in most states rents are only able to be increased once a year, and this is a seasonally quieter period for rental renewals.
Annual rental growth has been greatest in Darwin, regional Tasmania and Perth and weakest in Canberra, regional Victoria and regional NT. Only Canberra has an annual rental growth rate below headline inflation, meaning rents are rising faster than the broader cost of living in every other market.
As investment reduces and with inflationary pressures persisting, it is likely to get more difficult for renters. Landlords should also keep in mind that, with the high cost of living, renters may not have the capacity to pay much more for rent and may respond by moving to less ideal locations where rent is cheaper, or forming households to share the rental burden.
The national gross rental yield sat at 3.8 per cent in August 2026, its highest level since September 2019 following increases in each month this year. In the combined capital cities, rental yields are lower at 3.6 per cent, and in regional markets they are higher at 4.3 per cent.
The highest gross rental yields are in regional NT, Darwin and regional WA and are above 5.0 per cent in each. The lowest gross rental yields are found in Sydney, Brisbane and Adelaide.
Right now, the housing market is changing quickly, and the data that is available typically lags. Individual markets and properties can behave very differently to what the data is showing.
That’s why it’s essential to read the Herron Todd White Month in Review, as it provides independent, up-to-the-minute insight into what is happening in the market via the nation’s largest network of valuation professionals, who are inspecting, valuing and talking with buyers, vendors and agents every day.
From here, I expect further weakness in the housing market, with interest rates likely to remain elevated on the back of high inflation and tenuous confidence.
Whatever happens, we’ll continue to let you know what’s unfolding in the Month in Review.