Sydney homeowners are facing what analysts warn could be the largest house price correction in 40 years, with the median house price falling for six consecutive months. Higher interest rates have pushed mortgage costs to among the highest in Australia, squeezing affordability and driving some buyers out of the market, while a potential Reserve Bank rate rise in November looms as a further threat to prices. Melbourne is faring even worse, with values declining for a tenth straight month, weighed down by increased housing supply, the lingering effects of Covid lockdowns, and federal and state tax changes that have dampened investor demand.

Sydney's median house price has dropped $87,000 since November, a 5.8 per cent fall from $1.632 million to $1.545 million, according to Realestate.com.au figures, while Melbourne has lost almost $65,000 off the value of a typical home. Experts point to Federal Budget changes restricting negative gearing to new builds and altering capital gains tax rules, due to take effect from July 2027, as having already dented investor confidence and search activity. Melbourne, which has recorded just 37 per cent growth in house values since 2016 compared with more than double in Brisbane, Adelaide, Hobart and Perth, is described as the worst-performing capital city over the past decade.