What happened
After almost thirty years of gains, the Australian housing market has turned. Data from analytics firm Cotality show national prices have now slipped for six months running and are 5.2% under the high reached in March 2026, Singapore's Business Times reported, citing Bloomberg.
The two priciest cities have dropped the most. Sydney is 8.6% down from its February high and Melbourne has lost 7.2% since November. Seven of the eight capital cities are now in decline, with Darwin the lone exception, while regional areas are still rising.
What drove the turn
Over the past seven years Australian home prices climbed about 70%. Cheap credit, a migration surge after the pandemic and too little new supply all fed the rally.
The Reserve Bank of Australia (RBA) cut rates three times in 2025 but changed direction this year. It hiked in February, March, May and September, taking the cash rate from 3.6% to 4.6%, the highest since 2011. Repayments went up and borrowing capacity went down.
Heavy debt magnifies the effect. Household borrowing equals about 178% of yearly disposable income, and most loans carry floating rates, so each hike hits family budgets straight away. The top end is suffering most, with the dearest quarter of homes in Sydney and Melbourne already more than 10% below their highs.
A tax shake up for investors
In May the government announced its largest rework of housing taxes in decades. From July 2027, negative gearing, which lets landlords offset rental losses against taxable income, will apply only to newly built homes.
The 50% capital gains tax discount on investment property is also going. Instead, the purchase price will be indexed to inflation and tax charged on the remaining gain.
Tax office figures for 2022 to 2023 show more than 2.2 million Australians owned at least one rental property, and close to half used negative gearing. Lending to investors fell 8.6% between March and June 2026, according to official statistics.
Forecasts and fallout
Economists broadly expect further falls, though estimates differ. Westpac sees a 7.3% drop from peak to trough and CBA 9%. HSBC chief economist Paul Bloxham expects 13% nationally and 17% in Sydney. Bloomberg economist James McIntyre thinks prices will keep sliding into the first quarter of 2027.
Banks are already affected. CBA reported mortgage applications down 15% since May, and investor applications down 28%. Bloomberg Economics estimates lower housing wealth could trim consumer spending by as much as 0.3%.
RBA governor Michele Bullock notes that prices remain roughly 50% above 2020 levels. With August inflation at 4%, above the 2% to 3% target, the central bank is keeping a hawkish stance.
What it means for Bali
Australians have long been one of the largest visitor groups in Bali and a visible share of villa buyers. Many hold most of their wealth in homes back home. When those homes lose value and mortgages cost more, people tend to spend more carefully, which economists call the wealth effect.
The source does not link the Australian downturn to Bali and offers no direct data on demand on the island. Bloomberg Economics expects the drag from lower housing wealth on spending to become clearer in the second half of 2026. Spending tied to the home, such as furniture, renovation and garden work, could be hit hardest.