If you’ve been watching the property headlines lately, you’ve probably noticed the mood has shifted. According to Cotality’s July data, the national median dwelling value fell 0.7% for the month – the steepest monthly drop since December 2022 – and prices are down 1.9% over the quarter. It’s the fourth consecutive monthly decline since the market peaked back in March, and the national median now sits at $928,421.
But the headline figure only tells part of the story. Underneath it, there’s a genuine split forming between the top and bottom of the market, and it’s worth understanding which side you’re standing on.
A Market Moving in Two Directions
Over the three months to July, upper-quartile home values fell 3.2%, while lower-quartile values actually rose 0.3%. Zoom out to the full year and the gap gets even more striking: lower-quartile values are up 10.8% annually, compared to just 0.7% at the top end. Two very different markets, running under the same roof.
Cotality’s research points to borrowing capacity as the real driver here, more than sentiment alone. Higher-value properties are more sensitive to how much buyers can actually borrow, and three cash rate increases earlier this year have tightened that ceiling considerably. Add in reduced investor activity following changes to negative gearing announced in the Federal Budget – investors have historically been more active at the top end – and it’s the upper quartile feeling the squeeze first and hardest.
The city-level picture backs this up. Sydney and Melbourne are leading the declines, down 1.4% and 1.2% respectively for the month, with both now several percentage points below their 2026 peaks. Perth was the only capital to record a rise in July, while Brisbane and Adelaide posted smaller, more modest declines. Regional markets have generally held up better, though even they recorded their first combined decline since early 2023 – a sign the softening is broadening out rather than staying contained to the big cities.
The RBA’s own commentary lines up with what Cotality is seeing on the ground. Scheduled mortgage payments are now close to their 2024 peak as a share of household income, new housing lending has slowed noticeably, and auction clearance rates have fallen from around 66% in February to the low 40s by late July. That’s a genuinely sharp drop in buyer urgency in a relatively short space of time.
What This Means Depending on Where You Sit
For buyers, particularly at the higher end of the market, softer conditions and longer time on market are creating more room to negotiate than we’ve seen in a while. Fewer people fighting over the same property tends to shift the balance in your favour, at least for now.
For sellers, the adjustment has been slower. Cotality notes that expectations are only just starting to shift as more properties sit unsold for longer, which suggests some sellers are still pricing for a market that’s already moved on. Realistic pricing is becoming more important than it’s been in some time – particularly at the top end, where the falls are sharpest.
For anyone weighing up a purchase in this environment, knowing exactly what you can borrow – not just what a lender’s online calculator spits out, but what genuinely suits your budget and buffer – puts you in a far stronger position to negotiate with confidence rather than guesswork.
Key Takeaways
- National property prices fell 0.7% in July, the largest monthly decline since December 2022.
- Upper-quartile values are falling faster than lower-quartile values, with borrowing capacity the key driver behind the split.
- Sydney and Melbourne are leading the declines; Perth was the only capital to record a rise in July.
- Softer conditions and falling auction clearance rates may mean more negotiating room for buyers, especially at the top end.
Whether you’re weighing up buying in this market or just want a clearer read on where you stand, it helps to know your numbers before you start. We’re based in Richmond, Melbourne, and work with borrowers across Australia. Get in touch and we’ll work through your borrowing power together.
