The Market Is Falling. Should You Wait?

Before looking at what happened during previous property downturns, it helps to be clear about where we are today.

The hesitation buyers are feeling is not imagined. Interest rates are higher, borrowing capacity has tightened and property values have been falling across most capital-city markets.

One of the clearest reasons demand has weakened is simple: buyers have less borrowing power than they did at the beginning of the year.

The four interest-rate increases since February have not only increased mortgage repayments. They have also reduced the amount many households can borrow.

That matters because property prices are ultimately influenced by what buyers are willing — and financially able — to pay.

This distinction matters.

Today's weaker market does not necessarily mean Australians have suddenly stopped wanting to own property. Part of the change is that monetary policy has deliberately reduced how much households can borrow and, therefore, how much they can offer.

When borrowing capacity falls across a large number of buyers at the same time, competition can weaken even when the underlying need for housing remains.

But higher rates alone do not tell us whether waiting will ultimately prove to be the better decision.

Property downturns are often grouped together as though they are all the same. They aren't.

The Global Financial Crisis was fundamentally different from the lending correction of 2017⁠–⁠19. COVID was different again. And the 2022 downturn was driven by one of the fastest interest-rate tightening cycles in decades.

What history can give us is not a prediction of what happens next. It can give us perspective on how markets have behaved when buyers were uncertain before.

But that does not mean every downturn is short — or that every property market recovers at the same speed.

Australia does not have one property market.

The previous examples could leave the impression that Australian property downturns are usually brief and quickly followed by recovery.

Often they have been. But not always.

Some Australian markets have experienced much longer periods of falling values — and those examples are just as important to understand.

Cotality's historical analysis identifies capital-city downturns using its Home Value Index. The duration and magnitude of individual cycles vary substantially between cities and periods.

This is why talking about “the Australian property market” can sometimes be misleading.

Property is local.

Employment, population growth, housing supply, affordability and the structure of the local economy can produce very different outcomes — even when interest rates are the same across the country.

A falling market can create opportunity. But falling prices alone do not make a market — or a property — a good investment.

So what do the fundamentals underneath today's market actually look like?

Buyer confidence can change quickly. Population does not.

Even while property values have been falling, Australia's population has continued to grow.

In the year to March 2026, Australia added almost 393,000 people — and Victoria recorded the largest absolute population increase of any state or territory.

These numbers matter because every additional household needs somewhere to live — whether they rent or buy.

But population growth on its own does not guarantee property-price growth.

Where people settle, how much housing is available, what they can afford and how easily they can access credit all influence what happens next.

Population tells us one side of the equation.

Population growth creates demand for housing. But demand is only one side of the equation.

The other is how quickly Australia can actually build new homes.

Under the National Housing Accord, the national target is 1.2 million well-located homes over five years to June 2029.

This is why housing supply matters when we think about the current downturn.

Buyer sentiment can weaken in a matter of months. Borrowing capacity can change after a few interest-rate decisions.

Building hundreds of thousands of additional homes takes much longer.

That does not mean prices cannot fall further. They can.

It means the physical supply of housing operates on a much slower timeline than buyer confidence.

So what has that weaker sentiment actually changed for buyers today?

Falling prices are the most visible sign of a weaker property market. But they are not the only thing that has changed.

When buyers become more cautious, homes take longer to sell. And when properties remain on the market for longer, available stock begins to accumulate.

That can change the buying experience considerably.

For buyers, this changes the experience.

There may be more time to inspect, compare and conduct due diligence. There may also be less pressure to make an immediate decision simply because another buyer is standing behind you.

In some situations, longer selling periods and greater available stock may also create more room to negotiate on price, terms or conditions.

But that is not universal.

Good properties in tightly held locations can still attract strong competition, even in a weaker national market.

There is one more concern worth examining before we decide what today's market means for a prepared buyer.

Higher interest rates do not only affect people trying to buy. They also increase pressure on households already carrying a mortgage.

That raises an understandable concern during a falling market: could financial stress eventually force large numbers of owners to sell?

Some households are clearly under pressure. But the latest Reserve Bank evidence suggests the picture is more resilient than the headlines can sometimes imply.

Falling property values and mortgage stress are related, but they are not the same thing.

A property's value can decline while the owner continues making repayments comfortably. Likewise, a household can experience cash-flow pressure while still holding substantial equity in the property.

Forced selling becomes a greater risk when financial pressure, an inability to service the loan and insufficient financial or equity buffers occur together.

The evidence does not suggest that household stress should be ignored.

Around 2% of the variable-rate owner-occupier borrowers captured by the RBA's analysis are estimated to have a cash-flow shortfall, and individual households can experience very real financial difficulty even when the overall system remains resilient.

But the broader picture matters too.

Most mortgage holders continue to service their loans, negative equity remains uncommon and many borrowers retain substantial savings and housing-equity buffers.

Conditions can change.

Employment, household incomes, interest rates and the depth of any further property-price decline will all influence how household resilience develops from here.

We now have two very different sets of forces operating at the same time.

Short-term pressures are weighing on prices and buyer confidence. But population growth, housing supply constraints and household equity have not disappeared.

At first glance, some of the evidence we have looked at appears contradictory.

Property values are falling. Buyer demand is weaker. Borrowing capacity has declined and homes are taking longer to sell.

At the same time, Australia's population is still growing, expanding housing supply remains difficult and most mortgage holders still hold meaningful financial and equity buffers.

Both can be true at the same time.

This is what makes the current market difficult to reduce to a simple headline.

The forces weighing on prices today are real. Higher rates have reduced borrowing capacity, buyer activity has weakened and properties are taking longer to sell.

But the longer-term need for housing has not disappeared simply because buyer confidence has fallen.

Population growth continues. New housing takes time and money to deliver. And most borrowers still retain equity in their homes.

None of those factors tells us when property prices will recover.

They certainly do not prevent prices from falling further in the short term.

They simply explain why short-term market weakness and longer-term housing demand can exist at the same time.

For a buyer who is not financially ready, falling prices do not create an obligation to act.

For a buyer who is financially prepared, however, the question becomes more interesting.

If there is more choice, more time to investigate and less competition — but prices could still fall further — how should you think about the risk of buying today?

What if I buy today — and prices fall another 5%?

This is perhaps the most understandable fear in today's market.

Nobody wants to make a major purchase and then discover six months later that the market would value it for less.

So let us not dismiss the question.

If prices fall another 5% after you buy, your property is worth less than when you bought it.

That is real.

A lower valuation matters most when you need to act on it.

If you needed to sell during that period, the decline could become a realised financial loss — and transaction costs may add to that impact.

If you did not need to sell, the lower value would still matter, but it would represent the market's valuation of the property at that point in time rather than the final outcome of the investment.

This is why market timing and financial readiness are not the same thing.

A buyer can be wrong about the exact bottom of the market and still make a sound long-term decision.

They can also buy during a downturn and make a poor decision if the property, price or financial structure is wrong.

The market does not rescue every property.

Was the valuation wrong — or was the decision wrong?

A short-term decline does not, by itself, tell us whether the original purchase was a good or bad investment.

To answer that, we would need to ask different questions.

1. 01 — Can I hold it?

   Can you comfortably hold the property?

   If higher repayments, vacancy or unexpected expenses would immediately force you to sell, short-term price movements become much more important.

2. 02 — Why this location?

   Why did you choose this location?

   The investment case should be supported by local demand, employment, population, infrastructure, affordability and future housing supply — not simply because prices have fallen.

3. 03 — What am I paying?

   What did you pay?

   A strong asset can still become a poor investment if the buyer overpays. A weaker market should increase discipline around price, not reduce it.

4. 04 — What is my time horizon?

   How long were you planning to own it?

   A buyer with a short time horizon is exposed to short-term market movements in a very different way from someone whose strategy was designed around a full property cycle.

5. 05 — Would I still want to own it?

   Would you still want to own it if you could not check its value for five years?

   This forces the decision back to the quality of the property and the strategy rather than the next monthly market update.

There are situations where waiting is entirely rational.

If your employment is uncertain, your borrowing is already stretched, your financial buffer is inadequate or your strategy depends on selling again in the near term, a falling market is not a reason to take additional risk.

Lower prices do not make someone financially ready.

That does not mean timing is irrelevant.

Buying at a better price, negotiating stronger terms and entering when competition is lower can materially improve an investment.

But trying to identify the exact lowest day of a property cycle is a very different objective from making a well-researched purchase during favourable buying conditions.

Perhaps the better question is:

“Am I prepared to own the right property if they do?”

There is nothing wrong with waiting.

The important question is why you are waiting.

Waiting because your finances, strategy or personal circumstances are not ready can be a very sensible decision.

Waiting because you expect the market to eventually provide a moment of complete certainty is something different.

This is not an argument that someone in the second group should automatically buy.

The property still needs to be right. The price still needs to make sense. The finance still needs to be comfortable. And the local fundamentals still need to withstand scrutiny.

Is waiting improving your position — or simply making you feel safer?

A market downturn does not create readiness.

It can only change the conditions in which a prepared buyer makes a decision.

Today's market may offer more choice, more time and, in some situations, greater negotiating room.

But those advantages only matter if the buyer is financially capable of using them.

What exactly would need to happen before you felt ready to act?

They might.

They might not.

And even if they do, the timing, location and extent of those movements will only become clear afterwards.

The more useful question is whether a property decision makes sense for your circumstances — including the possibility that the market moves against you in the short term.

A lower purchase price does not automatically make a property a better investment.

And a falling market does not automatically make every purchase a mistake.

The quality of the decision still depends on what you buy, what you pay, how you finance it, and how comfortably you can hold it.

And sometimes, that decision will be to wait.