Housing prices have fallen in most capital cities this year, but Reserve Bank officials keep returning to a longer yardstick: the market remains roughly half as expensive again as it was at the start of the decade.

Australia's housing market has turned. After the Reserve Bank of Australia (RBA) lifted the cash rate three times earlier in 2026 and again on 29 September, taking the target to 4.60 per cent from 30 September, the Monetary Policy Board's statement noted that housing prices have fallen in most capital cities and that new housing loans have declined noticeably.

Yet the fall comes from a high base. In her Opening Statement to the House of Representatives Standing Committee on Economics in Canberra on 18 September 2026, Governor Michele Bullock said housing prices were about 50 per cent higher than in early 2020. Deputy Governor Andrew Hauser offered a similar reference point on ABC's 7.30 on 8 September, describing house prices as nearly 50 per cent higher than at the start of the decade and about 3 per cent higher than a year earlier.

How the dip has unfolded

Pieced together in order, the official record shows a market that peaked and then eased:

  • March 2026: national housing prices reached a peak, according to the minutes of the August Board meeting.
  • August 2026 (Board meeting, 10–11 August): the minutes recorded that national prices had fallen about 1½ per cent from that March peak but were still about 5 per cent above a year earlier. The Board attributed the decline to rate rises, Budget tax changes and weaker sentiment.
  • 13 August 2026: Assistant Governor (Financial Markets) Christopher Kent said in a Sydney speech that "Housing prices have declined in Sydney and Melbourne, with declines becoming increasingly broad-based", with monthly national price growth running at about -0.5 per cent for three months.
  • 8 September 2026: Hauser put prices at about 3 per cent higher than a year earlier.
  • 18 and 29 September 2026: Bullock's parliamentary statement, and then the Board's decision statement, said prices had fallen in most capital cities.

The narrowing annual gain, from about 5 per cent in the August minutes to about 3 per cent by Hauser's interview, is consistent with the monthly declines Kent described. The figures come from different points in time, so they are best read as a direction of travel rather than a precise measure.

Why the 50 per cent figure keeps coming up

A decline of 1½ per cent from a peak sounds modest beside a rise of around 50 per cent since early 2020.

The October 2026 Financial Stability Review (FSR), released on 1 October, put numbers on that resilience. It found that negative equity, where a mortgage is larger than the value of the home securing it, currently affects fewer than 1 per cent of borrowers.

The FSR also tested a much harsher outcome. In a hypothetical 20 per cent fall in house prices, the review estimated that "around 5 per cent of mortgages would fall into negative equity". That is a stress scenario, not a forecast, but it shows how much of the post-2020 gain would need to unwind before a meaningful share of borrowers owed more than their homes are worth.

Owners who bought before or early in the run-up have a larger buffer than those who bought near the peak or with small deposits. The FSR noted that the share of high loan-to-valuation lending has risen since the expansion of the Government's 5% Deposit Scheme, but said it "remains low overall".

Cities, regions and the supply backdrop

The dip has not been even. Assistant Governor (Economic) Sarah Hunter, speaking at the Regions Rising summit in Canberra on 14 September, said "house prices in the regions have not declined as much on average as they have in the bigger cities". Kent's August remarks named Sydney and Melbourne, with declines broadening from there.

Hunter was also careful not to pin the whole story on interest rates. "We know interest rates are part of that story. We don't think that's the whole story," she said of housing.

The deeper factor, in the Governor's telling, is supply. "Fundamentally, there is a structural undersupply in the housing market, which has underpinned prices over recent years," Bullock told the committee on 18 September. At the 29 September media conference she went a step further, saying "we have a structural under supply of housing" and adding: "It's possible the housing downturn may make that worse."

That last point is easy to miss: a downturn does not necessarily ease the shortage beneath it. The RBA has not quantified that effect in the material available, and it has not forecast where prices will go next.

What the RBA is, and is not, aiming at

It would be tempting to read the price dip as a goal of the rate rises. The Governor has been explicit that it is not. "Monetary policy does not target housing prices," she said on 18 September.

The Board's stated aim is inflation. Headline CPI rose 4.0 per cent over the year to August 2026, while underlying inflation has been about 3.5 per cent for the past six months according to Bullock, and the trimmed mean measure was 3.6 per cent in the June quarter. All sit above the 2–3 per cent target.

The next decision is due at 2.30 pm on 3 November 2026, after the September CPI release on 28 October. The Board has said only that it "will continue to do what it considers necessary" to return inflation to target.

The bottom line

The housing price dip is real and, by the RBA's account, has broadened beyond Sydney and Melbourne to most capital cities. But measured against early 2020, prices remain around 50 per cent higher, negative equity affects fewer than 1 per cent of borrowers, and regional markets have held up better than the big cities. The RBA's own officials describe interest rates as only part of the housing story, with a structural shortage of homes sitting underneath it. Where prices go from here is not something the RBA has forecast in the material reviewed, and the Board has been clear that housing prices are not its target.