Vendor discounts at 3.1%: a softening market for buyers

Australia's property market is showing some of the clearest signs of cooling in years. Vendor discounting has risen to a national median of 3.1 per cent across combined capital cities, new listings are tracking above the five-year average, and Cotality has flagged the market is "on the cusp of a downturn." For first home buyers who have been saving toward a deposit while watching prices pull further away, this shift in conditions is worth understanding in practical terms.

What the latest market data is showing

Cotality's May 2026 Monthly Housing Chart Pack recorded the Home Value Index rising just 0.3 per cent in April, the softest monthly reading in nearly a year. That compares to 0.6 per cent growth in March. Sydney and Melbourne both recorded outright monthly falls of 0.6 per cent in April, continuing a trend that has been building since early 2026.

Listings nationally are picking up. Over the four weeks to early May, new stock reaching the market totalled 39,319 properties, some 4.7 per cent above the five-year average. Total listings remain below historical norms at 127,821 nationally, but the gap is closing as buyer demand softens faster than new stock arrives.

The practical result for buyers is a widening window for negotiation. The 3.1 per cent national vendor discount means that on a property listed at $750,000, the average sale is currently settling closer to $726,750 at the point of contract. That gap has been growing steadily over recent months, and it represents a meaningful shift from the conditions of late 2024 and early 2025 when many properties were selling at or above asking price.

The forecasts behind the headlines

The coverage around this market shift has ranged from cautious to striking. Leading Sydney auctioneer Tom Panos described current conditions as "the toughest in seven years." Former Treasury economist Leith van Onselen has warned of a potential correction on a scale not seen in 40 years, citing a combination of elevated interest rates, record overvaluation, and a weakening employment outlook.

These headlines deserve context. Australia has been through meaningful property corrections before:

• 2017 to 2019: national values fell around 8.2 per cent over two years, driven by credit tightening following the Royal Commission into banking.
• 2022 to 2023: a decline of roughly 8.1 per cent over nine months as interest rates rose sharply from pandemic-era lows.

If conditions follow a similar pattern now, the practical effect on median dwelling values in major cities could be significant in dollar terms, though the pace and depth of any correction is not something any economist or property analyst can predict with confidence.

CBA economists, by contrast, are forecasting a more modest outcome, with dwelling price growth slowing to around 3 per cent over 2026 rather than an outright fall. Different forecasts reflect genuine uncertainty about whether the RBA is done hiking and whether buyer demand holds up as more listings come to market.

The cities where conditions are changing fastest

The national average masks very different experiences across Australia:

• Sydney and Melbourne are already in early-stage decline, with monthly falls recorded and auction clearance rates softening. Vendor discounting is most pronounced in these two markets.
• Perth continues to surge, recording annual growth above 24 per cent over the past year. Supply constraints and strong interstate migration are sustaining momentum despite national headwinds.
• Brisbane and Adelaide are holding up better than the two largest capitals but are showing signs of moderation from peak growth rates.
• Darwin and Canberra have both softened meaningfully over recent months.

Where you are buying determines which side of this market split you are navigating. It also affects which grants and concessions apply to your purchase, since these are set at the state level and vary considerably.

What softening conditions mean for first home buyers

A market shift does not automatically translate into easier entry for first home buyers. Interest rates remain at 4.35 per cent following the three 2026 hikes, and lenders assess affordability against rates roughly 3 percentage points higher again. That serviceability buffer means borrowing capacity has fallen by an estimated $50,000 to $75,000 for many borrowers since the start of the year.

The practical opportunities in the current environment include:

• More room to negotiate on price. Rising vendor discounts mean that submitting an offer below the listed price is no longer unusual. In Sydney and Melbourne in particular, buyers are increasingly able to negotiate terms, include subject-to-finance clauses, and request inspection periods that were hard to secure in a heated market.
• More properties to choose from. The uptick in new listings means longer selling campaigns and fewer multiple-offer situations. Buyers have more time to get legal advice, conduct building and pest inspections, and compare options before committing.
• Government schemes still available and unchanged. The First Home Guarantee (5 per cent deposit, no lenders mortgage insurance), Help to Buy shared equity scheme (still with places available across six states and territories), state First Home Owner Grant amounts, and stamp duty concessions have not changed with market conditions. In some markets, moderating prices are also making scheme price caps less of a barrier.
• An updated borrowing capacity estimate matters now. A figure from 12 or even six months ago may significantly overstate what a lender will approve at current rates. Before interpreting softer prices as an opportunity, confirm what you can actually borrow.

Working through the numbers with a mortgage broker who knows the current serviceability landscape is a practical step for buyers trying to understand what the shift in market conditions genuinely means for their purchase timeline.

Run the numbers

Use these tools to see what the current market conditions mean for your specific situation:

• Borrowing Power Calculator - get an updated estimate of your maximum loan size at the current 4.35 per cent cash rate, so you know what softening prices actually mean in terms of what you can buy.
• Interest Rate Shock Tester - model your monthly repayments at the current rate and stress test against a further increase, to understand what your budget can comfortably sustain before you commit to a purchase price.
• Grant Stacker - see every state and federal scheme you may be eligible for, including the First Home Guarantee and Help to Buy, and how they combine to reduce what you need at settlement.