Australia’s property market downturn deepened and broadened in August, with home values falling across 93% of capital-city suburbs. National values recorded a fifth consecutive monthly decline, leaving them 3.6% below their March peak. Inflation reaccelerated over the month, hardening expectations of higher interest rates — a risk that materialised just weeks later — and keeping sentiment fragile and buyer demand subdued even as lower prices improved affordability at the margin.

Key Economic Indicators

• Inflation (CPI): 4.0% – Headline inflation jumped from 3.5% in July to 4.0% in August, driven by higher fuel prices (up 14.8% as fuel-excise relief unwound) and housing costs. Underlying (trimmed mean) inflation held at 3.6%.
• Cash Rate: 4.35% (August) → 4.60% – The RBA held through August, then lifted the cash rate 25bp to 4.60% on 29 September — its fourth hike of 2026 — as inflation risks materialised.
• Consumer Confidence: ~76 – Sentiment improved from July’s ~74 to its highest level since early March, helped by steadier rates during the month, though it remains historically weak.

Auction clearance rates firmed late in the month but stayed below balanced-market levels. By the final week of August, Sydney lifted to around 51.5% and Melbourne to 53.7%, their strongest results in months, yet the combined capital-city clearance rate remained below 50%, where it has sat since late May. Brisbane continued to lag as the weakest major market, and auction volumes thinned in smaller centres like Canberra. Elevated stock, longer selling times and wider vendor discounting all point to a buyer’s market.

Rental conditions remained tight in August, though supply continued to ease gradually. On SQM Research figures, the national vacancy rate held at 1.3%, with Sydney steady at 1.7% and Perth among the tightest at 0.6%; Adelaide and Brisbane both stayed below 1%. Rents are up around 5.7% over the year, and with values falling, gross yields have continued to edge higher — but normalising population growth and record rental unaffordability are starting to cap further rent growth.

The Daily Home Value Index confirmed the downturn is now broad-based. Sydney (−4.7% over the quarter, −4.6% annually) and Melbourne (−3.9% quarterly, −4.7% annually) are both in clear annual decline, with Sydney now falling faster than in the 2022–23 correction. The mid-sized capitals have joined the slide: Brisbane fell 1.0% for the month (−2.7% quarterly), Adelaide 0.8% (−1.6% quarterly) and Perth 0.8% (−3.2% quarterly). Annual growth in those markets is still positive but fading fast — Perth 15.6% (from 20.5% in July), Brisbane 10.8% (from 14.8%) and Adelaide 8.6% (from 10.5%). Across the combined capitals, values fell 3.7% over the quarter.

Overall, Australia’s property market remained firmly under downward pressure in August, with the correction spreading well beyond Sydney and Melbourne. The subsequent rate hike to 4.60% reinforces the downside: higher borrowing costs, negative real wage growth, weak sentiment and a gradually loosening labour market all point to soft demand through spring. That said, persistently low new-housing supply, still-low unemployment and first-home-buyer incentives should help cushion the fall, limiting the risk of a sharper correction through the remainder of 2026.