Property market sentiment has gone negative for the first time since the pandemic, and the people saying so are the ones closest to the transactions. A September-quarter bank survey of about 228 agents, developers, fund managers and investors put its residential property index at -4. That is an 18-point drop, the third straight fall, and a long way under the +22 long-run norm.
Headlines will frame this as a crash in confidence. A better question is narrower: what is this number actually good for?
Sentiment is a mood reading, not a sales ledger
A survey like this asks professionals what they feel and expect. It does not count settlements, new listings or approved loans. That matters because sentiment tends to move with recent price direction. When prices have softened, people closest to the market report that conditions look soft. The forecast then looks like foresight but is often extrapolation.
So treat the 4.2 per cent expected fall over twelve months as a measure of how respondents are reading the present, not as an independent prediction. It rose from 2.5 per cent last quarter. Over two years, respondents expect annual growth of -1.9 per cent. Those are specific, but they come from opinion, not from a model tied to borrowing capacity or stock on the market.
If you want to test the forecast, line it up against three things the survey does not supply: transaction volumes, listing levels and what lenders will actually advance. If sales are holding and listings are thin, a 4.2 per cent fall would need unusual forced selling. If volumes are drying up and stock is building, the pessimists have a better case.
The split inside the gloom
The averages hide a lot of spread. Fifty-three per cent of respondents now call their local market declining, compared with 33 per cent in the previous survey. Yet 13 per cent think their market is close to a bottom, up from 4 per cent. Those are two different bets about timing sitting inside one negative headline.
The states diverge too. New South Wales is the weakest at -22, followed by Queensland at -9. South Australia expects the sharpest price fall at 5.4 per cent. Tasmania expects 4.6 per cent growth. A single national number, then, describes almost nobody’s local market. A buyer in Hobart and a seller in Sydney are reading different surveys inside the same report.
Key numbers
- Residential property index: -4, down 18 points
- Agents expecting a decline locally: 53%, up from 33%
- National price forecast, 12 months: -4.2%
- Rent forecast, national: +3.7%, led by WA and SA at 6.4%
Rates and credit, not price tags, are the barrier
The most useful finding is not about prices at all. Respondents say interest rates and access to credit have overtaken property prices as the main obstacle for buyers. That is a serviceability story. Prices can stay flat while a household’s borrowing capacity shrinks, and the buyer still cannot transact.
The damage shows up in who is buying new homes. First home buyers’ share of new-build purchases fell from 38.6 to 25.2 per cent. When the entry-level buyer steps back, the first rung of the market loses demand, and developers feel it quickly.
Two-thirds of respondents also say stamp duty deters newer buyers. Meanwhile, expectations that the federal 5 per cent deposit scheme will lift prices are easing. The scheme helps with the deposit hurdle, but it does not fix a borrowing limit set by rates.
Developers face a squeeze from both sides
For builders the picture is tougher. Construction costs remain the top barrier, cited by 77 per cent. Interest rates were named by 58.3 per cent, up from 39.6 per cent. Cost on one side and softer buyer demand on the other is the combination that stalls projects. Our look at builders borrowing to stay solvent shows how that cash-flow pressure plays out on the ground.
The rent forecast cuts the other way
Here is the complicating factor. Respondents still expect rents to rise 3.7 per cent nationally, with WA and SA leading at 6.4 per cent. Falling price expectations alongside rising rent expectations is not a contradiction. It points to buyers staying out of the market and remaining tenants, which props up rental demand while weakening sales demand.
For investors, that raises a real question about yield versus capital growth. A softer price outlook with firm rents improves gross yield on paper, but only if the property stays tenanted and the loan stays serviceable. For anyone weighing the tax side of that trade, our explainer on negative gearing after the 2026 budget is worth a read.
What this means for you
- If you are buying: do not anchor on the headline fall. Check local listings and sold prices in your suburb, and test your own borrowing at a buffer above today’s rate.
- If you are selling: the 53 per cent figure suggests competition for buyers. Price to the current market rather than last year’s.
- If you are an investor: pressure-test cash flow against rate and vacancy risk before counting on rent growth.
- If you are a renter: the rent forecast says relief is unlikely soon, especially in WA and SA.
The survey is worth reading as a temperature check. It is not a forecast you should stake a decision on. For context on how downturns and auctions behave, see our guide to house prices, downturns and auction clearance.
Next step: pull sold-price and listing data for your target suburb this week, and compare it with the state-level sentiment above before you act.
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General info, not financial advice.
