October Property Market Update 2026

In a changing housing market, the opportunity isn’t disappearing – it’s shifting. For brokers, the value is in helping clients understand their capacity, structure their debt and move with confidence.

Australian Housing Has Shifted Gears – What Mortgage Brokers Need to Know

Australia’s housing market has entered a very different phase in the second half of 2026. Property values are falling across most capital cities, borrowing costs remain high, listings are building and investors have started to pull back. Yet underneath the headline weakness, housing credit remains substantial, first-home buyer lending is elevated and rental conditions continue to support investor demand.

For mortgage brokers, this is less a story about the property market “stopping” and more about where the lending opportunities are moving.

The September 2026 Cotality Monthly Housing Chart Pack shows national dwelling values fell 3.1% over the three months to August, with the combined capital cities down 3.7%. Sydney recorded the largest quarterly decline at 4.7%, followed by Melbourne at 3.9%, Perth at 3.2% and Canberra at 2.8%.

Three-month change in dwelling values

Source: Cotality, Monthly Housing Chart Pack, September 2026. Data also incorporates ABS, RBA and APRA sources.

The change is particularly significant because some of the strongest markets of recent years are now moving in the opposite direction. Sydney values are 7.1% below their February 2026 peak, while Perth – despite still being 15.6% higher over the year – is now 3.2% below its April peak.

For brokers, falling prices can create two competing forces.

On one side, lower purchase prices improve the deposit equation and potentially reduce the amount borrowers need to finance. On the other, serviceability remains the dominant constraint, particularly following this year’s interest-rate increases.

The RBA cash rate remains at 4.35%, after three increases between February and May. Cotality estimates those increases reduced the borrowing capacity of a median-income household by approximately 7%, or more than $53,000. The average new owner-occupier mortgage of $735,000 has also seen repayments rise by a little over $350 per month as a result of the increases.

That makes the broker’s role increasingly important. Clients may see property prices falling and assume affordability has materially improved, but their borrowing capacity may have fallen at the same time.

Lending remains large – but the mix is changing

Perhaps the most important chart for brokers is the lending data.

During the June 2026 quarter, new housing finance commitments excluding refinancing totalled more than $60.5 billion for owner occupiers and $37.1 billion for investors. However, both have eased from recent peaks and investor lending fell sharply — down 10.2% in the June quarter.

Owner-occupier versus investor lending

Source: Cotality, Monthly Housing Chart Pack, September 2026. Data also incorporates ABS, RBA and APRA sources.

Investor lending had been climbing strongly between 2022 and early 2026 and at one point represented more than 40% of new housing lending. By the June quarter, that share had fallen to 38% nationally.

It is still historically significant.

Investors account for around 42% of lending in NSW, 39.5% in Queensland, 39.1% in South Australia and 38.1% in Western Australia.

That suggests the investment lending market has not disappeared. Rather, there has been a noticeable pause or recalibration.

For brokers, this is important. Many existing investor clients may now need considerably more detailed modelling around servicing, rental income, equity and cash flow before making their next purchase.

The days of simply asking “How much equity do I have?” are increasingly being replaced by “How much of that equity can I actually use and still service the debt?”

First-home buyers are becoming increasingly important

One area brokers should be watching closely is first-home buyers.

First-home buyer lending reached $18.38 billion in the June quarter, representing 30.4% of owner-occupier lending. Victoria was particularly strong at 33.9%, while South Australia reached 33.5% and Western Australia 30.6%.

Government-backed low-deposit programs are also influencing lending behaviour. Cotality notes that loans written at an LVR of 90% or higher have risen to 10.6% of owner-occupier originations, partly reflecting first-home buyers using the Government’s 5% deposit guarantee.

This creates a significant opportunity for brokers, but it also places greater emphasis on education.

Low-deposit borrowers entering a falling market need to understand the implications of leverage, particularly if they may need to sell or refinance in the first few years.

Buyers have more negotiating power

Another important shift is occurring in the transaction market.

Total property listings reached approximately 139,000 nationally in early September, up 18.1% on the same period last year and 2.2% above the five-year average. At the same time, the median time required to sell a property has increased from 28 days to 39 days nationally.

Vendor discounts have also widened, reaching approximately 4.0% nationally and 4.2% across the capital cities.

For well-positioned borrowers, this creates opportunity.

Finance approvals and strong pre-approval management become particularly valuable in this type of market. A purchaser with finance organised may be able to negotiate more aggressively where a vendor has already been on the market for six or seven weeks.

Investor cash flow is slowly improving

There is another development worth watching.

National rents are still rising at 5.7% annually, while property values are falling. As a result, national gross rental yields have increased to approximately 3.8% — their highest level since 2019.

Capital-city yields are around 3.6%, while regional markets average approximately 4.3%.

Darwin stands out with gross yields around 6.3%, while rental growth there remains above 11% annually.

Gross Rental Yields

Source: Cotality, Monthly Housing Chart Pack, September 2026. Data also incorporates ABS, RBA and APRA sources.

That does not mean investment property is suddenly cash-flow neutral. Cotality specifically notes that yields remain well below cost-neutral levels given current holding costs. But the direction is worth watching: prices are falling, rents are rising and yields are expanding.

For brokers, the next phase of the housing cycle could therefore be unusually interesting.

Borrowers are confronting tighter servicing while buyers are gaining negotiating power. Investors are stepping back while rental fundamentals remain strong. First-home buyers are becoming a larger part of the lending market, while falling prices are gradually improving entry points.

In this environment, mortgage broking becomes less about simply finding a competitive rate and increasingly about helping clients structure debt, understand capacity and position themselves for the next stage of the property cycle.