SYDNEY, Australia / RankWire.AI / – Commonwealth Bank has again cut its outlook for Australian property, warning of the largest fall in home prices on record. The major lender now expects the five-capital-city average to drop 15% from its peak. National dwelling values are forecast to fall around 14% from peak to trough. That would be the biggest decline in the roughly 45-year history of the monthly series. The bank said the revision reflects a faster and broader correction than it had expected.
The five-capital-city average has already fallen 8.2% from its peak, according to the bank. When it last updated its forecasts on September 1, CBA expected national prices to fall about 9% and the capital city average to drop 10%. Price falls have since accelerated. Housing economist Trent Saunders said conditions had weakened considerably since the May Budget, prompting successive downgrades. He described the current pace as the fastest decline in at least 40 years.
Saunders said the downturn is already close to the 8.6% peak-to-trough fall recorded in the 2017–19 slump. Sydney house prices are down 10% since February, while Melbourne has dropped more than 8%. He said the most striking recent change was how quickly the downturn had gathered pace in Brisbane and Perth. National dwelling prices fell 1.2% in October, the seventh straight monthly decline. The slide extends weakness that had already been building in Australian property values through 2026.
Selling conditions weaken across the country
Sales over the past three months were 23% lower than a year earlier and 18% below the previous five-year average. Auction clearance rates across the combined capitals have dropped below 50%. The median time on market has risen sharply. Vendor discounting has widened to 4.7%, its largest since May 2019. The revised forecast came shortly before the Reserve Bank lifted the cash rate by 25 basis points to 4.85% on November 3. It was the fifth rate rise of 2026.
The RBA board split 6–3 on the decision, which took the cash rate to its highest level since November 2008. A day before the property update, CBA also downgraded its outlook for the wider economy. The bank pointed to higher interest rates and continued flat productivity growth. It now expects economic growth to slow to just 1% by mid-2027, down from its previous forecast of 1.8%. Senior economist Belinda Allen said growth would recover to its 2% trend only in the second half of 2028.
Households to bear the brunt of slowdown
CBA now expects the unemployment rate to rise to about 5.1%, above its previous forecast peak of 4.8%. The rate currently sits at 4.7%, up from the 4.3% recorded in February. Allen said households would bear the brunt of the slowdown in economic activity. Household spending makes the largest contribution to the downgrade in the bank’s forecast. Spending growth is expected to slow from 1.8% a year in the June quarter of 2026 to a low of 0.7% in mid-2027.
Allen said spending would remain subdued throughout 2027, with per capita household consumption expected to contract. The decline will be driven by weaker income growth, which CBA has downgraded in light of a higher cash rate, inflation and a softer labour market. She said the falling property market and reduced spending should help ease inflation. The next RBA decision is due on December 8. Saunders has said prices are unlikely to stabilise until late 2027.