SYDNEY, Australia / RankWire.AI / – Commonwealth Bank has again cut its outlook for Australia’s housing market and now expects the largest price fall in the history of the national monthly series. National dwelling values are forecast to drop around 14% from peak to trough. The five-capital city average is expected to fall around 15%. Brisbane and Perth face the sharpest revisions, with falls of about 18% now forecast in each city. The bank also downgraded its outlook for economic growth and jobs.
CBA senior economist Trent Saunders said housing conditions have weakened considerably since the May Budget, prompting successive forecast downgrades. In its September update, the bank expected a national fall of around 9%. The five-capital city index is already 8.2% below its March peak. Saunders said the pace of decline is the fastest in at least 40 years. It is already close to the 8.6% peak-to-trough fall recorded in the 2017 to 2019 downturn.
National dwelling values fell 1.2% in October, their seventh consecutive monthly decline. That left prices 6.7% below their March peak, according to the bank’s analysis. Sydney values are around 10% below their February peak, while Melbourne has fallen more than 8%. CBA raised its forecast fall for Sydney from 13% to around 16%. Melbourne and Adelaide are each now expected to fall around 13%.
Brisbane and Perth lead the slide
Saunders said the most striking development has been how quickly the downturn has gathered pace in Brisbane and Perth. Brisbane values fell 2% in October and are now 8.3% below their May peak. Perth is down 8.9% from its April peak. In September, CBA had forecast falls of only around 8% in both cities. Saunders said the speed of the reversal suggests overexuberance played a growing role in the earlier upswing.
Selling conditions have also weakened across the country. Sales over the past three months were 23% lower than a year earlier and 18% below the five-year average. Auction clearance rates across the combined capitals have dropped below 50%, and homes are taking longer to sell. Vendor discounting has widened to 4.7%, the largest since May 2019. The figures extend a downturn that cut $34.1 billion from housing values in the June quarter.
Higher rates weigh on growth and jobs
The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.85% at its November meeting, its fifth increase of 2026. CBA also cut its growth forecast and now expects economic growth to slow to just 1% by mid-2027, down from 1.8%. Senior economist Belinda Allen said growth would only return to its 2% trend in the second half of 2028. Unemployment is now tipped to peak at about 5.1%, up from 4.7% today.
Allen said households will bear the brunt of the slowdown in economic activity. Household spending growth is expected to slow from 1.8% a year in the June quarter of 2026 to 0.7% by mid-2027. Weaker income growth, a higher cash rate and a softer labour market will drive that decline. CBA expects the housing market to stabilise in the second half of 2027, but not to recover materially. Auction clearance rates had already sunk to a six-year low in June.