ANZ slashes house price forecast: Sydney tipped to fall 8.4%, Melbourne 7.7% in 2026

ANZ Research has sharply revised its outlook for Australian house prices, moving from a mild fall forecast just a few months ago to one of the steepest downturn calls of any major bank. For first home buyers watching the market for a chance to get in, a bigger official forecast fall is worth understanding properly rather than reacting to a headline alone.

What ANZ changed

ANZ now expects combined capital city prices to fall approximately 4.3% this year and a further 3.4% in 2027, up from an earlier forecast of roughly 2.1% and 3.3% respectively. City by city, ANZ is tipping Sydney prices to fall around 8.4% in 2026 with another 2.9% fall in 2027, and Melbourne to fall around 7.7% in 2026 with a further 2.3% fall the year after. Taken together, ANZ's economists see a possible peak-to-trough decline for the combined capital cities of roughly 10.6%.

ANZ chief economist Madeline Dunk said the market has softened more than the bank expected since its last forecast update in June, with Sydney and Melbourne prices falling slightly faster than modelled and Brisbane and Perth starting to soften earlier than anticipated.

What the latest data shows

The revised forecast lines up with fresh market data released this week. Cotality's national Home Value Index fell approximately 0.9% in August, the fifth consecutive monthly decline, leaving national values around 3.6% below the peak recorded in March. The proportion of capital city suburbs recording a value fall through winter climbed to roughly 93%, up from under half in autumn, pointing to a downturn that has broadened well beyond Sydney and Melbourne.

• Sydney: down around 1.4% in August and roughly 7.1% below its February peak.
• Melbourne: down around 1.1% in August, with values well below the peak reached in late 2025.
• Auction market: the preliminary clearance rate across the combined capital cities eased to around 53%, down from close to 57% a fortnight earlier, a sign that buyer demand has softened alongside prices.

The Reserve Bank held the cash rate at 4.35% at its most recent meeting, but flagged that inflation remains above target and that further increases have not been ruled out. That combination of elevated rates and cooling demand is part of what is weighing on prices across most capitals.

What this means for first home buyers

A bank forecast is an estimate based on current conditions, not a certainty, and forecasts have already been revised more than once this year as the data has changed. Even so, a widely covered downgrade like this one is a useful prompt to think through your own numbers rather than assuming prices will move in one direction.

• If you are saving toward a deposit, a further price fall could mean your target purchase price moves lower over the next year, which may be worth factoring into your savings timeline.
• If you are close to buying, a softer market can translate into more room to negotiate on price, particularly in areas where clearance rates have eased and stock levels have built up.
• Falling prices do not automatically mean lower repayments, since interest rates remain elevated and could rise further. It may be worth checking how your budget holds up under both a lower purchase price and a higher interest rate scenario.

Run the numbers

These tools can help you see how a softer market and today's interest rate environment could affect your own plans:

• Borrowing Power Calculator - see how your borrowing capacity looks at current interest rates before you set a target price.
• Interest Rate Shock Tester - check how your repayments could change if the cash rate moves again while prices are still adjusting.
• Am I Ready to Buy? - work through whether a softer market changes the timing that makes sense for your own situation.