Property market
How resilient is the Australian property market?
Australian property has been through recessions, a global financial crisis, a pandemic and the fastest rate rises in a generation. Here is what the numbers show, including the softening under way in 2026, and what it means for investors in property-backed loans.
The Australian property market has been remarkably resilient. Over the three decades to 2021, house values grew about 5.6% a year, and the deepest national falls since have been shallow, roughly 6% to 8.5%, before recovering. Values are softening in 2026 after rate rises, which is exactly why lending discipline matters.
That combination, long-run strength with real short-run cycles, is the backdrop to every loan HomeSec Business Finance offers investors. HomeSec, an Australian private lender founded in 2004, lends against real estate right across the country, so it pays close attention to what the market is doing, not just what it has done. All figures below are as at September 2026 unless stated.
How much has Australian property grown over the long run?
Between December 1991 and December 2021, Australian house values rose about 5.6% a year and unit values about 4.7% a year, according to Cotality (formerly CoreLogic) data compiled by Aussie. Over the same 30 years, the national median dwelling value went from about $114,000 to about $710,000.
Growth has continued since. National values rose 8.6% in 2025, according to Cotality, and the national median dwelling value now sits at about $912,885.
Long-run growth does not mean values only go up. It means that, historically, falls have been limited and temporary at the national level. For a lender, that history matters less as a promise and more as a guide to how large a buffer is sensible.
How far have Australian house prices fallen in past downturns?
Here are the largest national drawdowns in Cotality’s home value index across recent decades, as reported by the ABC and Property Update.
| Downturn | Approximate national fall | What happened next |
|---|---|---|
| Early 1990s recession | About −6.2% | Recovered through the 1990s |
| Global financial crisis (2008–09) | About −7.6% over 13 months | Recovered as rates were cut |
| 2017–19 credit tightening | About −8.4% | Recovered from mid-2019 |
| COVID-19 (2020) | About −1% | Followed by a strong boom |
| 2022–23 rate rises | About −7.5% | New record high by November 2023 |
The pattern is clear. Even through a recession, a global banking crisis and the steepest rate rises in a generation, national values fell by less than 10% before recovering.
That is the national average. Individual cities, suburbs and property types have fallen further at times, and some regional markets have had longer slumps. The national record is a floor for thinking about risk, not a ceiling. Our history of Australian property downturns looks at each episode in more detail.
What is happening in the Australian property market in 2026?
Values are softening. The Reserve Bank has lifted the cash rate three times in 2026, in February, March and May, taking it to 4.35%. Borrowing capacity has fallen and buyers have become more cautious.
According to Cotality’s Home Value Index for August 2026, released in September:
| Measure | Result |
|---|---|
| National values, month | −0.9% |
| National values, quarter | −3.1% |
| National values, year | +2.7% |
| National values vs March 2026 peak | −3.6% |
| Sydney vs February 2026 peak | −7.1% |
| National median dwelling value | About $912,885 |
| Rents, year | +5.7% |
| National rental vacancy | 1.9% (pre-COVID average 3.3%) |
So far, this looks like a correction after a strong 2025, led by the most expensive market. It is not yet as deep as 2017–19 or 2022–23. It could deepen from here, and we do not pretend to know where it ends. What we do know is how we lend through it.
What supports Australian property values?
Several long-run drivers remain firmly in place.
Population growth. Australia’s population reached 27.9 million in March 2026, growing 1.4% a year, with net overseas migration of 292,100, according to the ABS. More people need more homes.
Undersupply. The National Housing Accord targets 1.2 million new homes between July 2024 and June 2029. Only about 308,000 had been completed by the March quarter of 2026, and the target is now not expected to be reached until the December quarter of 2030, according to the National Housing Supply and Affordability Council. Construction costs are around 51% above pre-COVID levels, which slows new building further.
Tight rental markets. National rental vacancy is 1.9%, well below the pre-COVID average of 3.3%, and rents rose 5.7% over the year. Low vacancy supports investor demand and makes property easier to sell or lease.
None of this stops values falling in a rate cycle. It does help explain why national falls have tended to be shallow and short-lived.
Why do an 80% LVR and short terms matter in a softer market?
Because the buffer, not the forecast, is what protects a lender. HomeSec lends to a maximum 80% LVR on residential property and lower on commercial property. On a second mortgage, the LVR includes the debt that ranks ahead.
Take a residential property valued at $1,000,000 with total secured debt of $800,000. The equity buffer is $200,000.
| Scenario | Property value | Debt | Remaining buffer |
|---|---|---|---|
| At settlement | $1,000,000 | $800,000 | $200,000 (20%) |
| After a 7.6% fall (GFC) | $924,000 | $800,000 | $124,000 |
| After an 8.4% fall (2017–19) | $916,000 | $800,000 | $116,000 |
| After a 15% fall | $850,000 | $800,000 | $50,000 |
Sale costs and accrued interest come out of that buffer too, so it is not unlimited. But a 20% cushion is well beyond the deepest national fall on record, and 80% is a maximum rather than a target: each loan’s pack shows its actual LVR. Our explainer on LVR for mortgage investors works through more examples.
Short terms help as well. Loans run for 1 to 12 months, so there is far less time for a market to move against the security than on a three- or five-year loan. Your capital comes back when each loan is repaid, and you decide whether to fund the next one in the market as it is then.
How does HomeSec choose property in a changing market?
HomeSec has been lending against Australian real estate since 2004 and knows property markets in every state, across capital cities and regional centres. That breadth matters. Markets rarely move together: while Sydney is falling, other cities may be flat or rising, and a regional town can behave very differently from its capital.
Three habits guide property selection:
- Mainstream property only. HomeSec avoids unusual or highly specialised properties with a thin pool of buyers.
- Nothing slow to sell. If a property would take a long time to sell, it is not suitable security, whatever its value on paper.
- No construction, development or land banking. HomeSec lends against completed real estate it can value today.
Each loan’s due diligence pack sets out the property, its location, its value and the LVR, so you can form your own view of the local market before you commit. The full set of criteria is in our lending rules.
What happens if a property has to be sold in a falling market?
Most loans are repaid the ordinary way, through the exit set out in the pack: a sale, a refinance or business proceeds. HomeSec manages that exit as maturity approaches, and a softer market is a reason to watch it more closely, not to wait and hope.
If a borrower does not repay, the loan is enforceable through the courts in every state. As mortgagee, the lenders can take possession of the property and sell it. HomeSec’s specialist mortgage and property lawyers act across Australia, and HomeSec meets the legal costs of recovery on defaulted loans.
In a falling market, that sale may take longer and achieve a lower price than the original valuation. This is exactly the scenario the equity buffer is there for, and exactly why HomeSec avoids property that would be slow to sell. Sale proceeds repay costs first, then the lenders in order of ranking. HomeSec’s own money is in the same loan, so it has every reason to achieve the strongest realistic price.
Is property-backed investment still sensible in 2026?
For investors who understand the structure, it can be. A property-backed loan is not a bet on prices rising. You earn a contracted interest rate, set loan by loan, and the property sits behind the loan as security. What matters most is how much equity sits between the loan and the property’s value, how quickly the loan comes back, and how saleable the property is.
That is why HomeSec’s rules focus on LVR, term and saleability rather than on market forecasts. The market will have good years and soft years. The discipline should not change with it. Our guide to the risks and protections covers the other risks involved, from borrower default to legal timeframes.
See how a loan is secured
The clearest way to judge a property-backed loan is to read its pack: the property, the valuation, the LVR and the exit. If you’d like to see one, register your interest and our Funding Manager will be in touch.
Frequently asked questions
How resilient is the Australian property market?
Historically, very. In recent decades the deepest national falls in dwelling values were roughly 6% to 8.5%, including about 7.6% in the GFC and 8.4% in 2017–19, and each was followed by recovery. Individual cities, suburbs and properties can fall further, so property selection and lending discipline still matter.
Are Australian house prices falling in 2026?
Yes, modestly. As at September 2026, Cotality's national index was about 3.6% below its March 2026 peak and Sydney was about 7.1% below its February peak, after three cash rate rises this year. National values were still 2.7% higher than a year earlier, and rents were up 5.7% over the year.
What has been the biggest fall in Australian house prices?
On Cotality's national index, the largest drawdown in recent decades was about 8.4% during 2017–19. The GFC fall was about 7.6% over 13 months, the early 1990s about 6.2%, 2022–23 about 7.5% and the COVID dip about 1%. Values reached a new record high by November 2023, after the 2022–23 fall.
Why does an 80% LVR matter if property values fall?
An 80% LVR means the loan is no more than 80% of the property's value, leaving at least a 20% equity buffer. Values would have to fall by more than that buffer, after sale costs and interest, before the lender's capital was exposed. That buffer is well beyond the deepest national fall on record.
What drives Australian property values?
The main long-run drivers are population growth, household formation and housing supply, with interest rates driving the shorter cycles. As at September 2026, Australia's population is 27.9 million and growing 1.4% a year, new housing is running well behind the Housing Accord target, and national rental vacancy is just 1.9%.
Sources
- Aussie — 30 years of property trends
- ABC News — How coronavirus compares to other property market shocks
- Property Update — CoreLogic national home value index reaches a new record high in November
- Cotality — Home Value Index, September 2026
- Cotality — 2025 delivers strong housing gains but 2026 set for a softer landing
- ABS — Australia's population grows 1.4% (March 2026)
- National Housing Supply and Affordability Council — Quarterly report, August 2026
- Reserve Bank of Australia — Cash rate target
Figures are as at 26 September 2026 unless stated. This page is reviewed by Paul Stone, Joint CEO & Founder of HomeSec Business Finance, and updated as markets change.
