Home values have now fallen for six straight months, including a 1.1% drop in September, according to a property research firm. Cheaper homes should mean busier open houses. Instead, the market has gone quiet.
That is the odd part of this downturn. Fewer owners are listing, yet unsold stock is climbing. Total stock on the market was 23.1% higher than a year earlier. The median capital-city sale now takes 39 days, up from 23 a year ago. Prices are falling and volumes are stalling at the same time.
Why falling property prices aren’t clearing the market
A normal price correction works like a sale rack. Prices drop, buyers return, stock clears, and the market finds a floor. This one isn’t following the script.
The missing ingredient is confidence. Prospective buyers, especially first-timers, are worried about catching a falling knife. If they buy now and values keep sliding, they could end up in negative equity. So they wait for a sign the bottom is in. Meanwhile the headlines keep telling them to keep waiting.
That creates a loop. Buyers hold off because prices are falling. Prices keep falling partly because buyers hold off.
In plain English
A price is only real when someone pays it. When buyers step back, listed prices and actual sale prices drift apart, and the data takes time to show it.
The pressures freezing buyers in place
This isn’t just nerves. Several hard constraints are stacking up:
- Four rate rises this year. Each one has cut borrowing capacity and lifted repayments.
- Persistent inflation. It keeps rate relief off the table and squeezes household budgets.
- Policy uncertainty. Debate over negative gearing and capital gains tax makes investors hesitate, because the rules they’d be buying under might change.
- Shrunken borrowing capacity. Serviceability sets the ceiling on what buyers can pay, and that ceiling has dropped.
A major home builder says confidence in Victoria is very low, though demand hasn’t vanished. That distinction matters. People still want homes. They just don’t want to commit at this moment.
The chief executive of a large property-portal group told shareholders on Thursday that more price declines are probable. They pointed to last week’s rate increase, tax changes and the cumulative weight of borrowing costs. That is a market insider saying the wait may be justified.
What the 39-day figure really tells us
Time on market is the better early-warning signal than headline price. A rise from 23 to 39 days means sellers are not getting the offers they expect, at the prices they want.
This is where seller anchoring comes in. Many owners are still pricing off what neighbours achieved earlier. Buyers are pricing off what rates and borrowing capacity now allow. Until those two numbers meet, homes sit.
The fact that fewer owners are listing but stock is still rising suggests listings aren’t being absorbed. That is a market stuck, not a market clearing.
For more on how downturns, auctions and clearance rates fit together, see our guide to house prices, downturns and auctions.
Who is exposed if sellers eventually give in
A frozen market can thaw gently or crack. Which one depends on who is forced to sell rather than choosing to.
Watch these groups:
- Recent buyers on thin deposits. They have the least equity cushion if values keep slipping.
- Owners facing repayment shock. Four rate rises hit hardest where household budgets had little slack.
- Investors weighing tax changes. If the rules shift, some may decide to exit rather than hold.
- Sellers who need to move. Job changes, separations and upsizing plans don’t wait for a better market.
So far, many owners can simply hold. That is why volumes have dried up instead of prices collapsing. The risk is that holding power runs out for a slice of the market, and capitulation sales reset the price benchmark for everyone nearby.
The counter-argument: a rare entry window
Not everyone reads this as a warning. Some Brisbane-based brokers say this is the best entry window in six years for informed, long-term buyers. Their case rests on two things: rents are rising quickly, and housing shortages haven’t gone away.
That is a fair point, with a catch. A long-term buyer with a strong cashflow buffer can ride out further falls. A buyer stretched to the limit cannot. The same market looks like opportunity or danger depending on your balance sheet.
Supply constraints also cut both ways. Thin building pipelines support prices over several years, but they don’t stop prices drifting lower in the next few months. For context on that pipeline, see home building starts lifting 7% while the pipeline thins.
Scenarios to hold in mind
Nobody can call the bottom, so think in ranges.
- Base case: Prices drift lower while stock stays elevated, then stabilise as sellers adjust expectations and rate pressure eases.
- Downside: Further rate pressure and tax uncertainty force more sellers to the table, and values fall faster.
- Upside: Rate relief arrives sooner than expected, buyers return, and stock clears before prices drop much further.
The signals to watch over the next few months are days on market, the level of unsold stock, and whether the sales that do happen are landing below asking prices. If time on market keeps stretching, the price adjustment isn’t finished.
Your next step: If you’re buying, work out what repayments look like with another rate rise and a further price fall, then decide if you can still hold comfortably. If you’re selling, price to where buyers actually are, not where the last sale was. Subscribe to the newsletter for the weekly signal.
General info, not financial advice.
