Australia's housing downturn has winners and losers. Mehdi could be one of them

For some buyers, softening conditions may have opened a door they once thought was closed.

"I found I had a chance." Medhi says things in Australia's housing market feel like they've shifted. Source: SBS News

When Mehdi came to Australia as a refugee, he never thought he would one day own a home.

The 43-year-old Iranian had spent years renting an apartment in Melbourne — a property that made everyday life significantly harder as a leg amputee.

"It's uncomfortable accessing because of my leg — going up and down [stairs]. It can sometimes be really hard," he told SBS News.

"A couple of years ago when I had surgery, I almost lost a knee. I wanted to do my groceries but it was quite difficult using a prosthetic and walking up and down stairs."

"I needed a single-floor house."

After a year of searching, Mehdi had his offer on a three-bedroom home in Melbourne's outer north accepted this week — a feat he said was made possible by the cooling of the housing market.

"The past three months, things have shifted. I found that I had a chance, but I had to go as quickly as I could," he said. "There are more options now because of the market — people purchasing property have dropped out a bit because of interest rates."

Mehdi has been searching for his first home to buy for the last year. He says there's been a shift in the last three months. Source: Supplied

Housing market tipped to fall

New forecasts from Domain predict house prices could fall by up to 7 per cent in Sydney and up to 8 per cent in Melbourne over the next 12 months, as higher interest rates, federal budget tax reforms and global uncertainty weigh on the market.

Canberra is also tipped to soften, while prices in Brisbane, Adelaide and Perth are still forecast to rise — driven by tight supply and strong demand that continues to outpace the southern capitals.

New Domain forecasting has tipped property values in Sydney, Melbourne and Canberra to drop over the next year — with experts saying other cities will likely follow. Source: SBS News

Domain's chief residential economist Nicola Powell said the divergence comes down to interest rate sensitivity.

"Any change in interest rates affects cities like Sydney, Melbourne and Canberra the most because buyers there tend to borrow more, while they tend to be better at providing more housing supply," she said.

"On the other hand, Brisbane, Adelaide and Perth have very under-supplied housing markets, and demand is still ahead of where supply is. They'll still have price growth, but it will be more subdued.

Cotality's June 'Pain and Gain' report recorded no growth nationally in May, with declines already underway in Sydney and Melbourne.

Despite the slowdown, 96 per cent of dwelling resales in the March quarter still recorded a nominal profit — the strongest result since 2005, underpinned by sharp value growth in recent years.

New Cotality data found 96 per cent of dwelling resales in the March quarter still recorded a nominal profit — but found there had been no growth nationally in May. Source: SBS News

The Reserve Bank of Australia has delivered three rate hikes in the first half of 2026, taking the cash rate to 4.35 per cent — effectively reversing all three cuts delivered through 2025 — and placing pressure on the housing market.

Independent property economist Cameron Kusher said the slowdown was already visible in the data before Domain's report landed — and could ultimately be broader than the forecast suggests.

"If you look at the monthly data, it's already showing that prices in Sydney and Melbourne have been falling all year and that in the other capital cities, the rate of price growth is slowing," he told SBS News.

"I'd actually probably say that some of the other capital cities where they're still expecting prices to rise — we'll end up seeing price falls over the next 12 months as well."

The biggest winners and losers

First-home buyers are emerging as beneficiaries of the slowdown, with Kusher pointing to reduced competition from investors following the federal government's changes to negative gearing and the capital gains tax discount.

"Investors and first home buyers usually compete for a similar type of stock. So definitely there's now less competition from investors for first home buyers," he said.

"If you are in a position as a first home buyer at the moment, it would definitely be a little bit easier to buy than it has been."

He pointed to inner-city apartment markets in particular as a growing opportunity, with more stock likely to hit the market as investor interest fades, but cautioned against rushing.

"If you buy now, the value of that property might go backwards for a little while," he said.

"I wouldn't recommend trying to pick the bottom of the market — it's extremely hard to do. But if you find the right property at the right price, you can probably negotiate a good price now anyway."

REA Group analyst Megan Lieu said buyer search activity, while softer than the record highs of last year, remained above average levels seen between 2024 and 2025 — suggesting demand was holding up despite the slowdown.

"We are seeing a mismatch between buyer and seller expectations," she told SBS News. "This may result in buyers having more negotiating power as conditions shift toward a more balanced market, and sellers adjust price expectations."

On who stands to lose, Kusher was clear.

"The big losers are investors, because there's been a big change to the tax treatment," he said. "People with a lot of debt are also losers at the moment because they're facing both higher interest rates and a fall in asset value.

"I think probably the biggest winners out of this is that first home buyer cohort."

'Not the forecast from Treasury'

The forecasts have drawn a sharp political response.

Education Minister Jason Clare pushed back on Domain's modelling and the assertion that up to $122,000 could be slashed off the value of a typical Sydney home, saying it did not reflect the government's own advice.

"That's not the forecast from Treasury. I view that with a healthy dose of scepticism," Clare told ABC News on Thursday. "The advice from Treasury is that house prices will continue to grow but in a sustainable way."

Former Nationals leader David Littleproud accused Labor of taking a "sledgehammer" to the housing market.

"If you are trying to sell, you have lost equity in your home," he said. "To make housing more affordable, stop the government spending that is putting interest rate pressure and bringing rates down, and you need to lift real wages — and that hasn't happened under Anthony Albanese."

'At least I have a roof above my head'

For Mehdi, the political debate feels distant from the reality of what he's navigating on the ground.

When he arrived in Australia, buying a home wasn't something he'd even considered.

"At the time when I moved here, I was quite sick. I wasn't able to function or walk 500 metres without falling or pain. So it took me a little while to get healed completely physically and to be able to move around and exercise and get work. It was a long journey."

Now, with a deposit down and a contract signed, he's clear-eyed about what he's taken on.

"You kind of do it with fear and you take a big risk because it's a long commitment. It's going to take a long time to pay it off — but it's the situation, you have to take it.

"Hopefully, things will be a bit better so I can invest my money instead of paying somebody else's mortgage. I have to work a little bit harder for a mortgage, but at least I have somewhere — at least I have a roof above my head."

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