Cotality Home Value Index: What Six Months of Falls Mean for Airbnb
Australian home values have now fallen for six months in a row. Cotality's national Home Value Index dropped 1.1% in September 2026, leaving values 5.2% below the March peak, with 97% of capital city suburbs lower over three months. Homes are taking longer to sell and stock is building. For anyone buying or running a short-term rental, here is what the data showed, why it is happening and what to do with it.
Key Takeaway
Cotality's October 2026 report shows a broad, orderly decline rather than a crash: national values are 5.2% below their March peak, annual change is flat, and regional markets are still up 5.6% over the year. Higher rates and weaker borrowing power are the main drivers. For short-term rental buyers, the opportunity is negotiating power. The risk is buying on hope rather than numbers.
The Numbers In One Place
National values fell 1.1% in September and 3.7% over the quarter. Capital city homes took a median 39 days to sell, up from 23 a year earlier, and listings were 23.1% higher. Rental vacancy rose to 2.0%. The cash rate is 4.60%.
Before You Make An Offer
Use the softer market to slow down, not to rush.
1Refresh your pre-approval: Ask your lender or broker what you can borrow at today's rate and after another rise.
2Confirm the rules first: Check council, state and strata rules for short-term letting before you fall for a property.
3Model income conservatively: Test the purchase at a lower occupancy and a higher interest rate.
4Use time on market: Ask how long a listing has been on the market and what has changed in the price guide.
5Keep a fall-back plan: Make sure the property still works as a normal rental if short-term letting stalls.
What Cotality's October 2026 Index Actually Showed
Cotality's October 2026 Home Value Index, published on 1 October 2026, covers the month of September. It is a widely used measure of Australian housing values because its hedonic method adjusts for the type of homes that happen to sell, rather than relying on a simple median price.
The headline was a 1.1% fall in national dwelling values in September, the sixth straight monthly decline. That takes the cumulative fall since the March 2026 peak to 5.2%. Over the year, national values are now flat at 0.0%, because the falls since March have offset the growth recorded earlier.
Westpac's economists noted that earlier months were revised lower again, with August now a 1.2% fall and July a 1.4% fall.
National, SeptemberDown 1.1% for the month and 3.7% over the quarter. Annual change 0.0%.
From the peakNational values are 5.2% below the March 2026 record high. Combined capitals are 6.4% below their March peak.
How broad the fall is97% of capital city suburbs fell over the three months to the end of September, and 71% of regional sub-markets fell in the month.
National median value$899,236 across all dwellings, with houses at $979,193 and units at $727,818.
Capitals versus regionsCombined capitals down 1.8% over the year. Combined regional markets up 5.6%.
Total returnNationally 3.5% over the year once rental income is added to the flat change in value.
"97% of capital city suburbs were down in value over the three months to end of September, highlighting the broad-based scope of this negative housing cycle." Tim Lawless, Cotality research director
City By City: Where The Falls Are Deepest
Every capital city except Darwin recorded a fall in September. The pattern has shifted over the year. Sydney and Melbourne turned first and are now well into negative annual change. Brisbane, Adelaide and Perth, which led the country for growth until recently, are now falling faster month to month, although their annual figures are still positive because of the gains made earlier.
SydneyDown 1.4% in September, 4.9% over the quarter and 7.0% over the year. Now 8.6% below its February 2026 peak.
MelbourneDown 0.7% in the month and 6.2% over the year. 7.2% below its cyclical high of November 2025.
BrisbaneThe sharpest monthly fall of the capitals at 1.5%. Still up 5.9% over the year.
AdelaideDown 1.3% in the month, up 6.5% over the year.
PerthDown 1.2% in the month and 6.0% below its April 2026 peak, but still up 10.1% over the year.
HobartA milder 0.5% fall in the month, up 7.0% over the year.
DarwinThe only capital to rise, up 0.4% in the month and 11.9% over the year.
CanberraDown 1.1% in the month and 1.6% over the year.
Westpac noted that across most cities, top-tier houses are leading the falls, while units and lower-priced homes are falling more gently. That matters for short-term rental buyers, because many holiday and city stays are in exactly those mid-priced and unit segments.
Why Values Are Falling: Rates, Borrowing Power, Tax And Confidence
Cotality attributes the downturn to a combination of pressures that have built through 2026. None of them is new on its own. Together they have reduced how much buyers can pay and how willing they are to commit.
Higher interest ratesFour RBA rises in 2026, the latest to 4.60% on 29 September, have cut borrowing capacity and lifted repayments.
AffordabilityValues remain high relative to incomes, and the deposit hurdle is still substantial for first home buyers.
Living costsElevated living expenses and negative real income growth are narrowing the pool of buyers who can qualify.
Investor tax settingsCotality says less favourable negative gearing and capital gains tax arrangements announced in the Federal Budget have already seen a sharp reduction in investor demand.
ConfidenceHousehold confidence remains deeply pessimistic, and weak sentiment usually means fewer sales.
What is holding it upA reasonably tight labour market and low new housing supply should reduce the risk of a sharper correction.
Cotality's central view is a gradual drift lower in values rather than a material downturn, with results varying widely by region, price point and buyer type.
The Rate Backdrop: 4.60% And A November Meeting To Watch
The Reserve Bank's Monetary Policy Board increased the cash rate target by 25 basis points to 4.60% on 29 September 2026. The Board said inflation remains elevated, that some of the upside risks it flagged in August are materialising, and that global energy prices are much higher than assumed because the conflict in the Middle East has broadened.
The same statement acknowledged the housing side directly: "housing prices have fallen in most capital cities and new housing loans have declined noticeably." It also listed "the economic effects of the downturn in the housing market" among the uncertainties. Even so, the Board judged that a further tightening of financial conditions was warranted and said it will do what it considers necessary, "including increasing the cash rate target further if needed."
Cash rate now4.60%, set on 29 September 2026. The decision was unanimous.
Next decisionThe Monetary Policy Board meets on 2 and 3 November 2026, then again on 7 and 8 December.
What economists expectWestpac described a follow-up increase in early November as a "more likely prospect" and expects housing momentum to stay weak into year-end.
For buyers, near-term rate risk is still on the upside. Plan for rates to hold or rise again, not for relief before summer.
The Quiet Signal: Fewer Sales, More Stock, Longer Selling Times
The selling conditions behind the index tell a buyer more about negotiating power than the headline does.
Sales volumesEstimated home sales over the past three months were 19.1% lower than a year earlier nationally and 13.3% below the previous five-year average.
Biggest drops in salesBrisbane down 27.2%, Sydney down 26.5% and Perth down 24.2% on a year earlier.
New listingsAcross the combined capitals, the flow of fresh listings was 9.2% lower than a year ago.
Total stockTotal advertised inventory was 23.1% higher than a year ago.
Days to sellA median of 39 days in the capitals, compared with 23 days a year earlier.
Vendor expectationsCotality says vendors are becoming more realistic about price, and buyers have more scope to negotiate.
For a short-term rental buyer, longer selling times are useful in a practical way. Sixteen extra days on market is time to check council rules, strata by-laws, booking data and building condition without the pressure of a weekend deadline.
"The lift in available stock is improving choice for buyers, but ironically, many prospective buyers don't have the confidence or financial capacity to buy at the moment." Tim Lawless, Cotality
Regional Markets Are Holding Up Better, For Now
Most Australian holiday-let markets sit outside the capitals, so the regional figures matter more to short-term rental owners than the Sydney headline. Regional dwelling values were up 5.6% over the year to September, against a 1.8% fall across the combined capitals. Regional values fell 0.7% in September and are 2.2% below their May 2026 peak.
Regional NSWDown 0.7% in the month, up 3.4% over the year, 2.8% below its April peak.
Regional VictoriaDown 0.3% in the month, up 3.6% over the year.
Regional QueenslandDown 0.9% in the month, up 6.3% over the year, 2.8% below its May peak.
Regional SADown 0.1% in the month, up 10.7% over the year.
Regional WAUp 0.1% in the month and 14.1% over the year.
Regional TasmaniaDown 0.1% in the month, up 11.6% over the year.
Several of the regional areas Cotality lists among the strongest for annual growth are recognised holiday destinations. Augusta to Margaret River and Busselton in WA was up 11.4% over the year, the Fleurieu and Kangaroo Island region of SA was up 6.9%, Tasmania's South East Coast was up 8.2%, and Huon to Bruny Island was up 6.0%.
Two cautions apply. Smaller regional markets can move sharply either way, and a market that is still growing gives a buyer less negotiating room. Resilience is a reason to look closely, not to pay any price.
Rents, Vacancy And Yields: What Changed For Landlords
The rental figures show the long-term rental market starting to loosen after years of extreme tightness.
Vacancy risingThe national rental vacancy rate reached 2.0% in September, up from a record low of 1.5% in February 2026 and the highest since January 2025. The pre-COVID decade average was 3.3%.
Vacancy by cityHobart is highest at 3.0%, then Sydney at 2.3% and Brisbane and Perth at 2.1%. Adelaide is tightest at 1.4%.
Rent growth slowingNational rents rose 0.3% in September in seasonally adjusted terms, the smallest monthly rise since May 2025. Annual growth is 5.5%.
Yields repairingGross rental yields rose to 3.85% nationally, the highest since August 2019. Capitals range from 3.4% in Sydney to 6.5% in Darwin, and regional markets average 4.3%.
Cotality was careful on cash flow: even with yields rising, "opportunities for neutral to positive cash flow remain low", given interest, insurance, maintenance and strata costs.
Long-term renting remains a sound, simple strategy, and rising yields help it. But when vacancy rises and rent growth slows, a landlord has little ability to respond until the lease ends. A short-term rental owner can adjust prices, minimum stays and channels from one week to the next. That control is the core of the case for short-term letting, and it matters more in a softer market than a hot one.
What This Means For Airbnb And Short-Term Rental Buyers
A softer market changes the balance of power in a sale. It does not change what makes a short-term rental work: the right location, rules that allow it, a property guests want, and income that covers the costs with room to spare. The opportunity is that a buyer now has the time and leverage to insist on all four.
More choiceStock is up, so there is less need to compromise on layout, parking or location.
More timeLonger selling times allow proper due diligence on rules, strata, condition and booking demand before an offer.
More negotiating roomVendors are adjusting expectations, and finance or due diligence conditions are easier to secure.
Less competition from investorsCotality reports a sharp drop in investor demand, which leaves fewer competing buyers in many segments.
Tighter financeBorrowing capacity has fallen with each rate rise, so the maximum you can pay may be lower than it was in March.
Possible further fallsNobody can pick the bottom. Buy on income that works today, not on a quick rebound.
You do not need to buy at the lowest price of the cycle. You need a property that earns well, at a price the numbers support, with finance you can comfortably carry.
Worked Example: What A Softer Price Does To Your Numbers
The following figures are illustrative only. They are not a forecast for any property or market, and they use round numbers to show the mechanics.
Imagine a coastal holiday home that would have been priced at $760,000 earlier in the year, close to the combined regional median of $758,931. In a softer market, a buyer negotiates 5% off, paying $722,000.
Smaller loanAt an 80% loan-to-value ratio, the loan is $30,400 smaller (illustrative).
Lower interestAt an illustrative 6.45% rate, that is about $1,960 a year less interest on an interest-only basis.
Smaller depositThe 20% deposit falls by $7,600, before stamp duty, which also falls with the price.
The saving is real, but notice its size. A $1,960 annual interest saving is roughly six nights at an illustrative $320 a night. The purchase price helps, but the income the property earns every week has a much bigger effect on whether the investment works.
Price is one lever. Income is the bigger one.
Negotiate hard, but spend most of your energy on the questions that decide revenue: demand, rules, guest appeal and how well the property will be run.
Long-Term Rental Versus Airbnb On The Same Home
Here is the same illustrative $760,000 regional home run two ways. These figures are illustrations only. Real results depend on the property, the market, the season and how well it is managed. Cleaning fees are assumed to be charged to guests and paid to the cleaner, so they are left out of both sides.
As a long-term rental (illustrative)
Gross rent at the regional average gross yield of 4.3%: about $32,680 a year.
Less property management at 7%: about $2,290.
Less two weeks of vacancy between tenants: about $1,260.
Less landlord insurance: about $1,800.
Income before loan, rates and maintenance: about $27,330.
As a well-run short-term rental (illustrative)
212 booked nights (58% occupancy) at an average $320 a night: $67,840.
Less full-service management at 20%: $13,570.
Less platform and channel fees at an illustrative 5%: $3,390.
Less utilities, internet and guest consumables: $6,500.
Less a furniture and linen replacement reserve: $4,000.
Less short-term rental insurance: $2,200.
Income before loan, rates and maintenance: about $38,180.
In this illustration the short-term rental earns about $10,850 a year more from the same home. Now test it. At 45% occupancy, or 164 nights, the same short-term rental produces about $26,660 after the same costs, slightly below the long-term rental. A well-chosen, well-run short-term rental can earn materially more, but the advantage depends on occupancy and rate.
The extra income of a short-term rental is earned, not given. It comes from buying where guests want to stay and running the property like a business.
Borrowing Power Is The Real Constraint
For most buyers in late 2026, the limit is not the price of the property. It is what the bank will lend. Lenders assess new home loans at the loan rate plus a serviceability buffer. APRA confirmed on 28 May 2026 that the buffer remains at 3 percentage points, and that banks can still direct up to 20% of new lending to borrowers with a debt-to-income ratio of six times or more.
Here is how one rate rise flows through, using illustrative figures. A borrower whose budget supports a $600,000 loan assessed at 9.20% (a 6.20% loan rate plus the 3-point buffer) faces an assessed repayment of about $4,914 a month. If the loan rate rises 0.25 points to 6.45%, the assessment rate becomes 9.45%. The same $4,914 a month now supports a loan of only about $587,000.
Before the rise (illustrative)Assessed at 9.20%: $600,000 maximum loan.
After the rise (illustrative)Assessed at 9.45%: about $587,000 maximum loan, roughly $13,000 less.
Actual repayment changeOn a $600,000 principal and interest loan over 30 years, about $3,675 a month at 6.20% and $3,773 at 6.45%.
Short-term rental buyers have an extra step. Lenders differ in how they treat Airbnb income, so ask your broker early which approach your lender takes. It can change the loan you are offered more than a rate rise does.
What It Means For First Home Buyers
First home buyers are squeezed from both sides. Prices are easing, which helps, but each rate rise also lowers the amount a lender will approve. Cotality notes that purchasing affordability has improved only modestly, because values are still high relative to incomes and the deposit hurdle remains substantial.
The practical upside is time. With fewer competing buyers and longer selling periods, first home buyers can inspect more properties, compare more sales and avoid the pressure of a fast-moving market. Ask a broker to refresh your pre-approval at today's rates, and treat any guide price as a starting point rather than a ceiling.
What It Means If You Already Own An Airbnb
If you already own a short-term rental, a fall in the value index does not change your income this summer. Your guests are paying for the stay, not for the market value of the property. The two things to watch are your loan costs and your revenue.
Your rateCheck what your lender has passed on since 29 September and whether a refinance or fixed portion makes sense for you.
Your summer pricingReview December and January rates, minimum stays and gap nights now, while there is still time for bookings to fill.
Your channelsMore than one platform spreads demand and reduces reliance on one channel.
Your guest mixIf households are cutting costs, make sure your listing shows its value clearly.
A lower valuation can matter if you plan to refinance, sell or borrow against the property in the next year. If you do, get a realistic estimate of value before you commit to anything, and do not assume the bank will value it at the March price.
Rules Still Decide Where You Can Buy
A cheaper property is only a good short-term rental if it can legally operate as one. Rules vary by state, council and building, and several are under review. Recent examples show why this check comes before price.
Greater SydneyNSW allows a property where the host is not present to be let for up to 180 days a year in Greater Sydney. In April 2026, City of Sydney councillors voted to investigate further limits.
Byron ShireApplies a 60-day limit to unoccupied short-term rentals, which shows how far a local cap can differ from the state default.
South AustraliaThe state is consulting on a short-stay registration scheme, with councils possibly setting their own land-use rules and rates. Consultation closes at 5pm on 30 October 2026.
Strata buildingsApartment by-laws and owners corporation rules can restrict short-term letting regardless of council rules. Read them before you offer.
Always confirm the current rules with the council, the state government and the strata manager for the exact property.
Risks That Have Not Gone Away
A buyer's market still carries risk.
Further rate rises. The RBA has said it will increase rates further if needed. Test your numbers at least one or two more rises higher.
Further price falls. Cotality expects a gradual drift lower. A purchase should not rely on prices recovering within a set time.
Softer discretionary spending. Weak confidence can affect travel budgets, and no market is immune.
Regulation. Councils and states continue to review short-term rental rules, as South Australia and the City of Sydney show.
Holding costs. Insurance, maintenance and strata fees add to interest. Budget for them separately.
None of these is a reason to stay out of the market. Each is a reason to buy with a margin of safety: a price that works with conservative income, finance with headroom, and a property that can always fall back to a normal long-term lease.
What To Do Next: A Two-Week Plan For Buyers
If this report has you thinking about buying, use the next two weeks, before the November RBA decision and Cotality's next monthly index, to get ready rather than to rush.
1Talk to a broker: Get an updated borrowing figure at today's rates and at one more 0.25-point rise.
2Ask about short-term income: Confirm how your lender treats Airbnb income before you choose a property type.
3Shortlist two or three areas: Favour places with year-round reasons to visit.
4Check the rules: Confirm council, state and strata rules for each shortlisted area in writing.
5Pull real demand data: Look at booked nights and achieved rates for similar homes, not just asking prices.
6Build two budgets: One for short-term letting at conservative occupancy, one for a long-term lease as the fall-back.
7Set your walk-away price: Decide it before you inspect, based on the income numbers.
This article is general information only and does not take your circumstances into account. Figures marked illustrative are examples, not forecasts or promises of any return. Get advice from a licensed financial adviser, tax adviser, lawyer and credit professional before making lending or investment decisions.
Sources Used In This Article
Figures were checked on 12 October 2026. Index figures are revised monthly, so check the latest release.
Airbnb with everything: a softer market rewards buyers who arrive with the location research, rules check and income numbers already done.
Buy the right property
We find and assess short-term rental properties on demand, rules, strata and realistic income, then negotiate in a market that now favours prepared buyers.
Thinking of buying while the market is soft?Book a 15-minute call. We will talk through your budget, the areas you are considering and what a short-term rental there could realistically earn.
FAQs About The October 2026 Cotality Home Value Index
How much did Australian home values fall in September 2026?
Cotality's national Home Value Index fell 1.1% in September 2026, the sixth monthly fall in a row. National values are 5.2% below the March 2026 peak, and annual change is flat at 0.0%.
Which cities are falling the most?
In September, Brisbane fell 1.5%, Sydney 1.4% and Adelaide 1.3%, while Darwin rose 0.4%. Over the year, Sydney is down 7.0% and Melbourne 6.2%, while Perth and Darwin are still up more than 10%.
Are regional property markets falling too?
Regional values fell 0.7% in September but are still up 5.6% over the year, compared with a 1.8% annual fall across the combined capitals. Regional WA, SA and Tasmania have recorded the strongest annual growth.
Why are house prices falling in Australia?
Cotality points to higher interest rates, reduced borrowing capacity, stretched affordability, living costs, weak confidence and less favourable investor tax settings.
Is now a good time to buy an Airbnb property?
A softer market gives prepared buyers more choice, more time for due diligence and more room to negotiate. It suits buyers whose chosen property has strong guest demand, allows short-term letting and still works at conservative occupancy and a higher rate. Get licensed advice first.
Will house prices keep falling?
Nobody knows for certain. Cotality expects a gradual drift lower rather than a sharp correction, and Westpac expects weak momentum into year-end.
When is the next RBA interest rate decision?
The RBA Monetary Policy Board meets on 2 and 3 November 2026, followed by 7 and 8 December. The cash rate is currently 4.60%. Check the RBA website for the latest decision.
What is happening to rents and rental vacancy?
Cotality reports national rents up 5.5% over the year, but monthly growth has slowed to 0.3%. The national vacancy rate rose to 2.0% in September from a record low of 1.5% in February 2026, and gross rental yields have risen to 3.85%.
How does a rate rise reduce borrowing power?
Lenders assess loans at the loan rate plus a 3 percentage point buffer, which APRA confirmed in May 2026. As an illustration, a 0.25-point rise can cut the maximum loan for the same budget from $600,000 to about $587,000.
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