For the past few years, buying property in Australia meant queueing at open homes and paying whatever it took. That market is gone. Cotality's national Home Value Index fell 0.7% in July 2026, the sharpest monthly drop since December 2022, and suddenly the nervous party at the contract table is the vendor.
Most buyers respond to a falling market by freezing. Understandable, but it wastes the best negotiating conditions in years. This is a practical playbook for buying while values fall: where your advantage comes from, and how to use it with discipline.
What Cotality's July 2026 data actually shows
The July numbers from Cotality (formerly CoreLogic) describe a downturn that is broadening, not fading. The national index flatlined in May, fell 0.4% in June, then dropped 0.7% in July. On the same measure the combined capitals index peaked back in March 2026, while the national index, propped up by regional strength, held on until autumn before rolling over. Here is how July looked across the five largest capitals:
| Market | July 2026 change (Cotality Home Value Index) |
|---|---|
| Sydney | -1.4% |
| Melbourne | -1.2% |
| Brisbane | -0.6% |
| Adelaide | -0.2% |
| Perth | +0.1% |
The regions have now joined in. The combined regional index fell 0.2% in July, its first decline since January 2023, with regional NSW down 0.4% and regional Victoria and Queensland each down 0.3%. Only pockets such as regional South Australia (up 1.4%) and regional Western Australia (up 0.9%) are still climbing. Sydney and Melbourne, meanwhile, already sit more than 5% below their recent peaks.
The causes are no mystery. The Reserve Bank has lifted the cash rate three times in 2026, taking it to 4.35% in May, and this year's Federal Budget rewrote the rules for investors: negative gearing limited to new builds from 1 July 2027, and the 50% CGT discount replaced with an indexed cost base approach. Commonwealth Bank economists expect new investor lending to roughly halve over 2026 compared with late 2025, and they have cut their own price forecast for the year from 5% growth to flat. We unpacked what the 2026 Budget tax changes mean for buyers separately. The short version for anyone buying a home: fewer investors are bidding against you.
Why the leverage has swung to buyers
A soft market changes the mechanics of every purchase. The July release puts total advertised listings across the combined capitals at 5.7% above the previous five-year average, so buyers finally have genuine choice. Capital city auction clearance rates have held below 50% since late May, and slipped into the low 40s by late June. When more than half the homes taken to auction fail to sell under the hammer, price-setting power changes hands.
Fewer buyers are competing, too. Cotality's May report put estimated home sales in Sydney down 17% and Melbourne down 14.2% on a year earlier, and its research director Tim Lawless noted these are the cities where advertised supply has risen to above-average levels, "providing more choice and better leverage for buyers".
Vendors are adjusting late, but they are adjusting. The flow of new listings has deteriorated in recent weeks, led by Sydney, as would-be sellers look at conditions and decide to wait. That self-selection matters for you. Many of the vendors still on the market in August are there because they need to sell: a deceased estate, a divorce, a bridging loan, an investor exiting ahead of the tax changes. Those vendors take serious offers seriously.
The playbook: how to buy well while values fall
Price off sold comparables, not asking prices
An asking price in a falling market is an opening position, often set months ago in a different market. Anchor to what has actually sold. Pull comparable sales from the last 60 to 90 days, weight the most recent ones heaviest, and adjust for drift. Sydney values fell 1.4% in July alone, which against an end-of-May median dwelling value of about $1.28 million works out near $18,000 in a single month. A comparable sale from April flatters the vendor. Say so, politely, with the evidence in hand.
Read days on market and the listing history
Time on market is your negotiation thermometer, and buyers gain bargaining power as it stretches. Before you offer, find out how long the property has been listed, whether the price has been cut, whether it passed in at an earlier auction, and whether it has been relisted with a new agency. A home sitting for eight weeks with one price reduction has a vendor doing sums on every offer that arrives. None of this is secret. The listing portals show most of it, and a direct question to the agent usually fills the gaps.
Negotiate the conditions back in
Boom markets strip contracts bare. Buyers waived building and pest inspections, went unconditional and accepted whatever settlement date the vendor wanted, because someone behind them would. With clearance under 50%, you can put the protections back. Make your offer subject to building and pest. Keep a finance clause unless your approval is genuinely unconditional. Ask for the settlement period that suits you: longer if you need to sell first, shorter if the vendor wants speed and you want a discount for providing it. Conditions cost nothing to request, and vendors are accepting them again.
Use pre-auction offers, and stay for the pass-in
With most auctions failing to clear, two windows open. The first is before auction day: a written pre-auction offer with a short expiry forces a stressed vendor to weigh a certain deal against an uncertain Saturday. The second is the pass-in. If bidding stalls below reserve and you are the highest bidder, you generally earn the first right to negotiate directly with the vendor, minutes after the market has told them their reserve was wrong. That is about the best-timed negotiation in Australian property. Our auction playbook covers bidding tactics, walk-away prices and the pass-in conversation step by step.
The upper quartile is where the real discounts are
Cotality's tier data holds the most interesting number of the winter: upper-quartile home values fell 3.2% nationally in the three months to July, while the lower-priced tier gained 0.3%. Expensive homes are being repriced fastest, while cheaper stock is held up by first home buyer demand under the 5% deposit scheme. The entry-level squeeze is a story for another day. For upgraders, though, the maths gets interesting.
For anyone trading up, a falling top end narrows the gap in dollars. Take a worked example: if you own a $900,000 home in the resilient cheaper half of the market and want a $1.8 million home in the upper quartile, a 3.2% fall in the target's value is worth $57,600, while your own home has roughly held. The exact numbers will differ block to block, but the direction holds: the bridge you need to cross just shortened by nearly $58,000 in a single quarter. Selling and buying in the same soft market is the cleanest way to upgrade, because you give a little on your sale and take more on your purchase.
Discipline: what a falling market does not change
A discount on a bad asset is still a bad asset
Falling markets discount everything, but they discount problems hardest. A home on a main road, in a flood zone or with structural issues will look temptingly cheap this spring. The discount is usually fair value, and whatever you save now tends to be handed back when you sell. Quality stock, well located and structurally sound with decent land content, falls less and recovers first. Check insurance before you commit as well. Premiums in flood and bushfire areas have become a genuine affordability problem, which we covered in our guide to home insurance costs in 2026. A cheap house you cannot affordably insure is not cheap.
Do not try to pick the exact bottom
Nobody can, including the professionals. AMP's Shane Oliver went into 2026 expecting national price growth of 5% to 7%. By June, Commonwealth Bank economists had cut their 2026 forecast to flat, pointing at higher rates and the Budget's tax changes. Cotality's own base case in May was "a further loss of momentum and a drift towards lower home values, rather than a sharp correction". That is credible research houses rewriting their view of the same market within months, so treat any confident prediction of the bottom with suspicion.
The honest position is that falling markets can keep falling, and this one may. Buy when the right property appears and your finances comfortably support it, and negotiate today's price rather than last quarter's, with a margin for further falls. If you wait for certainty, you will be bidding against everyone else who waited. We made a version of this argument in calmer conditions in our 2025 buy-or-wait piece. The logic holds. Your negotiating position is simply stronger now.
Serviceability still sets your ceiling
Falling prices do not mean easier loans. This year's rate rises have reduced borrowing capacity and lifted repayment burdens, with average investor mortgage rates around 6.4% against combined capitals gross rental yields of about 3.5%. Rents are still running hot, up 5.9% over the year to June 2026, with national vacancy dipping to 1.5% in May, near the record lows of 2022 and 2023. Holding property is not getting cheaper for anyone. So work out your true borrowing power before you negotiate, not after. A good mortgage broker can stress-test your numbers at today's rates and show what another rise would do to your capacity, which is worth knowing before you go unconditional on anything.
How a buyer's agent changes the equation in a downturn
Everything above is doable on your own. It is also close to a part-time job, and the selling agent across the table does it full-time. A falling market is where a good buyer's agent earns their fee, for reasons specific to conditions like these.
Start with appraisal discipline. A buyer's agent prices the property off the latest settled sales and current momentum, sets a walk-away number with you, and stops the quiet creep of "we came this far, let's stretch". In a market moving this fast, that discipline protects you in both directions: not overpaying, and not losing the right home over a token gap.
Access matters too. Selling agents call buyer's agents first when a vendor needs a quiet, certain sale, and that is exactly the vendor you want to meet. Off-market and pre-market opportunities tend to grow in a soft market, because some owners must transact but do not want a public campaign going stale on the portals.
Then there is sheer negotiation practice. You might negotiate a property purchase twice in a decade. A busy buyer's agent does it every week and knows what passed-in vendors actually accepted last weekend. Our guides to what a buyer's agent does and what one costs cover the detail. If you want that firepower on your side of the table, GoMatch is our free service that matches you with buyer's agents who know your target market. It takes a couple of minutes and there is no obligation.
FAQ: buying in a falling market
Is buying in a falling market a mistake?
No, provided you price off current evidence and keep a margin of safety. A falling market mostly punishes buyers who pay boom prices out of habit, and rewards the ones who negotiate. Your bigger risks are overstretching on borrowing and buying compromised stock because it looks cheap.
How much below the asking price should I offer?
There is no universal percentage, because asking prices vary in honesty. Work upward from sold comparables rather than downward from the ask: price the property off the last 60 to 90 days of sales, adjust for the monthly drift the index is measuring, and let that number lead. If the evidence lands 5% below the ask, that is your case. If it lands at the ask, a lowball only burns goodwill.
Should I just wait until prices stop falling?
You can, but recognise the trade. Nobody rings a bell at the bottom, forecasters have already rewritten their 2026 numbers once, and when confidence returns the upper hand you enjoy today goes with it. If your deposit and borrowing power are ready and the home fits a long-term plan, negotiating hard now on quality usually beats guessing the turning point.
Do auctions still matter with clearance rates under 50%?
Yes, but they work differently. Fewer competing bidders means more properties pass in, and the passed-in negotiation is often where the real deal happens. Go prepared to bid to your evidence-based limit, and equally prepared to negotiate calmly if the hammer never falls.
Where this leaves you
The July data describes the most buyer-friendly conditions since 2022: values drifting lower, stock above average, clearance under 50% and vendors adjusting to a market that stopped going up. None of that makes buying automatic. Serviceability is tighter, quality still costs real money, and a market that has been losing ground since autumn can keep losing it.
The winning posture is patient and unsentimental. Know your numbers, price off evidence, ask for the conditions that protect you, and walk away when the deal is wrong. Do that, and the downturn becomes the discount you waited years for. For the first time since 2022, the person holding the pen is you.
Sources
- Cotality, "Australia's housing market downturn widens", Home Value Index, July 2026 results, 2026.
- Cotality, Home Value Index media release, "National values flatline in May as housing markets face stronger headwinds", 2026.
- Property Update, "Australian housing market update" (Cotality Home Value Index coverage, June and July 2026 data), 2026.
- Reuters, "Australia's home price retreat gathers pace in July, Cotality data shows", 2026.
- Commonwealth Bank Newsroom, "Housing market faces multiple headwinds as price outlook downgraded", 2026.
- AMP, Oliver's Insights, "Expect some slowing in 2026" (housing outlook for 2026), 2026.
