Home Values Fall for a Sixth Straight Month as the RBA Assesses Mortgage Buffers

Cotality's national Home Value Index fell 1.1% in September 2026, the sixth straight month of falling values, taking the cumulative decline since the March 2026 peak to 5.2% nationally (Cotality Home Value Index 1 Oct 2026). The Reserve Bank of Australia released its October 2026 Financial Stability Review on 1 October 2026, and the RBA assesses that most Australian households with mortgages remain well placed to manage more difficult conditions, even if housing prices were to fall sharply, although there are pockets of stress (RBA media release 1 Oct 2026).

What did Cotality's Home Value Index show for September?

Cotality's Home Value Index fell 1.1% in September, marking the sixth straight month of falling values (Cotality 1 Oct 2026). Every capital city except Darwin recorded a fall in home values over the month, and 71% of the regional SA3 sub-markets recorded a decline in values over the month (Cotality 1 Oct 2026). Darwin (0.4%) was the only capital city to avoid a fall over the month (Cotality 1 Oct 2026). Tim Lawless, Cotality's research director, said: "97% of capital city suburbs were down in value over the three months to end of September, highlighting the broad-based scope of this negative housing cycle" (Cotality 1 Oct 2026). Cotality says the housing downturn reflects a combination of affordability constraints, higher interest rates, elevated living costs, and weaker consumer sentiment, all of which have reduced purchasing capacity and dampened buyer demand (Cotality 1 Oct 2026).

How did the capital cities move?

Brisbane recorded the sharpest monthly decline among the capitals in September, with values down 1.5%, edging past Sydney's 1.4% fall (Cotality 1 Oct 2026). Cotality says Melbourne showed a milder rate of decline in September, at -0.7%, than each of the mid-sized capitals, where values were down more than 1% (Cotality 1 Oct 2026). Cotality's 1 October 2026 release put Sydney values 8.6% below their February 2026 peak, a decline Cotality says is marginally deeper than the equivalent stage of the 2022-23 downturn (Cotality 1 Oct 2026; Cotality Home Value Index 1 Oct 2026). Cotality says Melbourne values are 7.2% below their cyclical high in November 2025 and 7.5% below the record high from March 2022 (Cotality 1 Oct 2026).

On an annual basis, Cotality reports the national outcome has been flat (0.0% change in values), but some markets are still showing strong annual gains, reflecting the period of growth through 2024 and early 2026 (Cotality 1 Oct 2026). Perth (10.1%) and Darwin (11.9%) have recorded the highest annual gains among the capitals, while Sydney (-7.0%) and Melbourne (-6.2%) are well into negative annual change and Canberra home values are also lower over the year, down 1.6% (Cotality 1 Oct 2026; Cotality Home Value Index 1 Oct 2026). Regional dwelling values are up 5.6% annually compared with a 1.8% annual decline across the combined capitals (Cotality 1 Oct 2026).

What is happening to sales and listings?

In its 1 October 2026 release, Cotality estimates that the number of home sales over the past three months was tracking 19.1% lower than a year earlier nationally and 13.3% below the previous five-year average (Cotality 1 Oct 2026). Cotality says the volume of home sales relative to a year earlier was down most sharply in Brisbane (-27.2%), with Sydney (-26.5%) and Perth (-24.2%) also recording an annual decline in sales of more than 20% (Cotality 1 Oct 2026). "The sharp drop in sales has implications for the broader economy, with lower sales likely to hit some retail segments as well as stamp duty revenues for state governments," Mr Lawless said (Cotality 1 Oct 2026).

In the same release, Cotality reported that across the combined capitals the flow of new listings added to the market was 9.2% lower than a year earlier, but total inventory was tracking 23.1% higher (Cotality 1 Oct 2026). "Despite fewer new listings entering the market, inventory levels have risen sharply because the rate of sale has fallen even faster. Capital city homes are now taking a median of 39 days to sell compared with 23 days a year ago, resulting in an accumulation of advertised supply," Mr Lawless said (Cotality 1 Oct 2026). Mr Lawless also said: "The lift in available stock is improving choice for buyers, but ironically, many prospective buyers don’t have the confidence or financial capacity to buy at the moment" (Cotality 1 Oct 2026).

What does the RBA's Financial Stability Review say about mortgage holders?

The Review's chapter on the resilience of Australian households and businesses says household and business borrowers continue to display a high level of resilience overall, and loan arrears remain low, despite financial pressures picking up in 2026 in response to higher inflation and interest rates (RBA Financial Stability Review 1 Oct 2026). The RBA says inflation has been elevated in 2026 and that, as a result, the Monetary Policy Board has increased the cash rate by 100 basis points to help return inflation to target, and that while some households continue to experience hardship, the estimated share of mortgagors in severe financial stress or in arrears has, so far, remained low, supported by the strong labour market and mortgagors' savings and equity buffers (RBA Financial Stability Review 1 Oct 2026). The RBA's cash rate table shows four increases of 25 basis points in 2026, effective 4 February, 18 March, 6 May and 30 September, taking the cash rate target from 3.60 per cent to 4.60 per cent (RBA cash rate table, accessed 16 Oct 2026). At its meeting on 29 September 2026, the Monetary Policy Board decided to increase the cash rate target by 25 basis points to 4.60 per cent (RBA 29 Sep 2026).

The RBA says the estimated share of variable-rate owner-occupier borrowers experiencing a cash flow shortfall – where income is not sufficient to cover scheduled mortgage repayments and essential expenses – increased a little over the first half of 2026, but remains relatively low at around 2 per cent (RBA Financial Stability Review 1 Oct 2026). The RBA says lower-income borrowers are more likely to be in this group and that, in addition to cutting back their spending to mostly essential items and trading down in quality for some goods and services, these households have had to make other difficult adjustments to continue servicing their mortgages, such as selling assets and working additional hours (RBA Financial Stability Review 1 Oct 2026). The RBA says, however, that most borrowers in a cash flow shortfall are estimated to have savings that would enable them to cover their cash flow shortfall for at least six months, assuming they adjusted their consumption down to essential levels (RBA Financial Stability Review 1 Oct 2026). The October 2026 Review says the share of housing loans more than three months behind on their repayments has increased a little over the year to date but remains around pre-pandemic levels (RBA Financial Stability Review 1 Oct 2026). The RBA says most mortgagors hold large savings buffers in offset and redraw accounts, with the median borrower able to cover over a year of scheduled mortgage payments at current interest rates from these buffers, a stronger position than before the pandemic (RBA Financial Stability Review 1 Oct 2026). Based on the economic outlook presented in the August Statement on Monetary Policy, the RBA projects the estimated share of variable-rate owner-occupier borrowers experiencing a cash flow shortfall to remain around its current level of a little under 2 per cent for some time (RBA Financial Stability Review 1 Oct 2026).

What does the RBA say about housing equity as prices fall?

The RBA says housing prices have declined in recent months as housing market sentiment has weakened, reflecting the somewhat restrictive stance of monetary policy and changes to negative gearing and capital gains tax discount policies (RBA Financial Stability Review 1 Oct 2026). The RBA also says recent tax changes affecting housing, as well as the higher level of the cash rate, have contributed to lower demand for housing credit in recent months and a decline in housing prices following a number of years of strong housing price growth (RBA Financial Stability Review 1 Oct 2026). The RBA says that, despite this, most household balance sheets remain strong, with less than 1 per cent of borrowers estimated to owe more on their loan than the value of their property (negative equity) (RBA Financial Stability Review 1 Oct 2026). The RBA says recent buyers and those who took out higher loan-to-value ratio (LVR) loans are more likely to be in negative equity, including first home buyers participating in the Australian Government 5% Deposit Scheme; however, it says the potential risks to financial stability from these borrowers are mitigated by the structure of the scheme and the typical low-risk characteristics of most first home buyers (RBA Financial Stability Review 1 Oct 2026). The RBA says information from liaison with banks suggests hardship or arrears for participants in the Australian Government 5% Deposit Scheme remain contained, and notes that the arrears rates of recently originated loans may understate their eventual performance because these loans have had less time to experience adverse income or expenditure shocks and transition into arrears (RBA Financial Stability Review 1 Oct 2026).

The RBA says that while downside risks to housing prices remain, its Securitisation System data suggest that even in a scenario involving a large uniform fall in housing prices of 20 per cent from current levels, only around 5 per cent of mortgages would fall into negative equity, and notes that this scenario applies a uniform 20 per cent decrease to current housing values, assuming all else remains the same, and does not consider the broader macroeconomic implications of declines in housing prices (RBA Financial Stability Review 1 Oct 2026). The RBA says negative equity is insufficient to trigger default if borrowers remain able to service their loans, which it says remains the case for the vast majority of these households (RBA Financial Stability Review 1 Oct 2026). In a very adverse downturn scenario – which the RBA describes as, for example, a shock that may originate from overseas, where the unemployment rate increases to 6.3 per cent, inflation increases to 7 per cent, and the cash rate rises to 5.6 per cent – the RBA estimates the share of mortgagors at a higher risk of defaulting on their loans would increase to around 5 per cent, only a little higher than the peak in 2023 (RBA Financial Stability Review 1 Oct 2026). In this scenario, the RBA estimates around two-thirds of these borrowers have insufficient income to cover their expenses but have enough buffers to service their debts and essential expenses for at least six months, and that even if housing prices decline by a further 20 per cent, few households are in negative equity (RBA Financial Stability Review 1 Oct 2026).

What does the RBA say about investors and lending standards?

The RBA says investor credit growth picked up strongly over 2025 but has slowed recently and is expected to moderate further in the period ahead in response to tax changes, tighter monetary policy settings and softer housing prices (RBA Financial Stability Review 1 Oct 2026). The RBA says that in periods of declining housing prices, investors may be less willing to enter the market and more inclined to sell properties to limit losses, which can amplify price declines and contribute to a more pronounced downturn than would otherwise occur; however, it says that, like other borrowers, most investors have considerable equity positions in their properties and have historically exhibited lower rates of arrears and default than owner-occupiers (RBA Financial Stability Review 1 Oct 2026). In its October 2026 Review, the RBA says that, in the context of the current environment and outlook, it supported APRA's recent position to keep macroprudential policy settings unchanged, and that APRA's serviceability buffer, which requires lenders to assess a prospective borrower's ability to service their mortgage at an interest rate 3 percentage points above their current loan rate, also plays an important role in ensuring that new borrowers across the system are well placed to withstand shocks to their incomes, expenses or repayments (RBA Financial Stability Review 1 Oct 2026).

What to watch next

The ABS is scheduled to release the Consumer Price Index, Australia, September 2026 on 28 October 2026 at 11:30am AEDT (ABS, accessed 16 Oct 2026). The RBA Monetary Policy Board is scheduled to meet on 2–3 November 2026 (RBA board meeting schedule, accessed 16 Oct 2026).

Sources

1. Cotality — Australian housing values down for sixth straight month in September (1 Oct 2026) — https://www.cotality.com/au/insights/articles/australian-housing-values-down-for-sixth-straight-month-in-september
2. Cotality — Home Value Index October 2026: Australian housing values down for sixth straight month in September (1 Oct 2026) — https://discover.cotality.com/hubfs/Article-Reports/COTALITY%20HVI%20OCT%202026%20FINAL.pdf
3. RBA — Release of Financial Stability Review – October 2026 (1 Oct 2026) — https://www.rba.gov.au/media-releases/2026/mr-26-28.html
4. RBA — Financial Stability Review – October 2026, 2. Resilience of Australian Households and Businesses (1 Oct 2026) — https://www.rba.gov.au/publications/fsr/2026/oct/resilience-of-australian-households-and-businesses.html
5. RBA — Statement by the Monetary Policy Board: Monetary Policy Decision (29 Sep 2026) — https://www.rba.gov.au/media-releases/2026/mr-26-27.html
6. RBA — Cash Rate Target (accessed 16 Oct 2026) — https://www.rba.gov.au/statistics/cash-rate/
7. RBA — Board Meeting Schedules (accessed 16 Oct 2026) — https://www.rba.gov.au/schedules-events/board-meeting-schedules.html
8. ABS — Consumer Price Index, Australia (accessed 16 Oct 2026) — https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia