Weakened buyer confidence has driven house prices down across every capital city for the first time in 15 years and the second time ever, according to Domain's September Quarter 2026 House Price report.
Australian house prices fell a record 4.7 per cent over the quarter with Perth recording the sharpest drop of 7.4 per cent, while Brisbane and Adelaide also logged their steepest house-price falls on record.
Median house prices in Sydney are at a two-year low after falling 4.7 per cent in the September quarter, to $1.66 million, while Melbourne registered its largest quarterly fall in four years.
Housing Minister Clare O'Neill said the movement still reflected the cyclical nature of the nation's property market.
"This is the third or fourth downturn in house prices that we've seen just in the last decade ... it is unfair to report about house-price growth looking at this just in the last six months," she told ABC Radio on Thursday.
"We do need to slow house-price growth around Australia, and if that is controversial to you, I'm happy to wear the controversy."
Labor has copped some blame for the downturn over ending negative gearing and paring back the discount on capital gains tax in May's federal budget.
But because those changes don't enter force until July 2027, economists have largely attributed the falls to the Reserve Bank hiking the cash rate to its highest level in 15 years.
While a softer jobs figures for September lengthened the odds of a Melbourne Cup day rate rise, RBA deputy governor Andrew Hauser on Wednesday maintained there were "hard choices" ahead and reiterated the November meeting was live.
Higher inflation expectations were becoming embedded as the Middle East supply shock dragged on, which he described as "a central banker's nightmare", he said.
Inflation was "higher than we would like for longer than we would like," Finance Minister Katy Gallagher told ABC News on Thursday, but she said housing was a long-term investment that could weather a fluctuating market.
Ms O'Neill said the government's tax changes would have enduring beneficial consequences to the housing market beyond the Reserve Bank's decision-making.
"The changes that we have made to the housing market are permanent changes that, for the first time at every auction around the country, put a first-home buyer on a level playing field with an investor," she said.
Some, including Melbourne couple Jessica Ongarello and Callum McIntyre, have managed to take advantage of the tumbling market.
"We saw how depressed the market was and we're like, this is our opportunity to buy in the area that we want to live in," Ms Ongarello told AAP.
Ms Ongarello said her bank's lending calculation was revised after September's interest rate rise, which left her with a home loan offer $100,000 lower than the initial quote.
"We've missed out a couple of times now on being a successful bidder because of that," she said.
House prices could continue to fall for many months to come, Domain chief residential economist Nicola Powell told AAP.
"Something needs to shift to alter the confidence to transact, and I cannot envisage the confidence changing until we see an interest rate cut," she said.
"And ultimately that prospect is in the latter part of next year."
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