Is the Housing Market Crashing? What CBA’s 14% Fall Forecast Means for You

The country’s biggest home lender has just delivered its gloomiest housing forecast on record. The Commonwealth Bank now expects national dwelling values to fall around 14% from their March peak before they find a floor, with the five capital cities tipped to drop about 15%. If that plays out, it would be the steepest housing downturn in the 45-year history of the bank’s monthly price series.

That headline sounds alarming, and for recent buyers it is genuinely worrying. But a forecast is not a crash that has already happened, and it does not mean every home loses 14%. Here is what CBA actually said, what the latest price data shows, and what it means if you own, are buying, or invest in property.

Quick answer: what CBA is forecasting

In an economic update released on Tuesday 3 November 2026, CBA cut its housing outlook for the second time in two months. The bank had been calling a 9% national fall in September. It now expects a 14% peak-to-trough fall nationally, with prices stabilising in the second half of 2027 and no meaningful rebound after that. Brisbane and Perth cop the biggest downgrades, at 18% each from peak to trough. Sydney is tipped to fall 16%, while Melbourne and Adelaide are each tipped to fall 13%.

Part of that fall has already happened. Property data firm Cotality’s Home Value Index shows national values are already 6.7% below their March peak after falling 1.2% in October, the seventh monthly decline in a row. So on CBA’s numbers, roughly half the forecast national fall is already behind us, and roughly half is still to come.

What the forecast means city by city

CBA’s peak-to-trough forecasts, and what they mean for a typical dwelling in each capital, look like this:

Sydney is the furthest along the path already. Values there are down 10.1% from peak, or about $123,220, which leaves roughly another $72,000 to go if the 16% forecast proves right. Brisbane and Perth, by contrast, have already blown through CBA’s previous forecasts, which is exactly why their outlooks were cut the most.

Why CBA changed its mind

CBA senior economist Trent Saunders said the correction had turned out “faster and broader than expected”, forcing the bank to cut its outlook for every mainland capital. Two things stand out in the bank’s reasoning.

First, the mid-sized capitals ran too hot. Brisbane and Perth enjoyed years of exceptional growth, and CBA says fading “overexuberance” in those cities is now outweighing even tight supply. Cotality notes that almost every suburb in Brisbane, Perth and Adelaide lost value over the past three months.

Second, higher interest rates are doing their work. The Reserve Bank lifted the cash rate to 4.85% on Tuesday 3 November, its fifth rise of 2026. Cotality estimates borrowing capacity has dropped by around 11.5%, or more than $105,000, through this hiking cycle. When buyers can borrow less, they can pay less, and prices follow.

The day-to-day signs of a buyers’ market are all there: property sales are down 23% on a year ago and 18% below the five-year average, homes are taking a median 39 days to sell (the longest since August 2020), vendor discounts of 4.7% are the deepest since May 2019, and capital city auction clearance rates have been stuck below 50%.

Is this a bubble bursting, or just a correction?

That depends on what you mean by bubble. If a bubble means prices rose well beyond what incomes and rents could support, then the warning signs were there: Sydney’s median house price ran past $1.19 million while median household income sat around $120,000, and household debt reached record levels.

But a bursting bubble usually means a disorderly collapse, and most of the evidence points to something slower. The downturn is being driven by higher borrowing costs and stretched affordability, not by forced selling or a banking crisis. The Reserve Bank has said most mortgage holders would still be in positive equity even if house prices fell 20%. And CBA itself is not forecasting a collapse: it expects prices to stabilise in the second half of 2027, helped by cheaper homes, higher rental yields, a persistent shortage of new supply and, eventually, lower interest rates.

One honest caveat: the experts do not agree on how far prices have already fallen. Cotality puts the national fall at 6.7% from the March peak, while PropTrack puts it at just 4.3%. Different indices measure different things, so treat any single number as an estimate, not gospel.

What it means if you own a home

For most long-term owners, this is uncomfortable rather than dangerous. Prices rose so far before the downturn that many owners still hold a large equity buffer. Cotality points out that a 20% fall from Perth’s record high would only take values back to around mid-2025 levels.

The exception is recent buyers, especially first-home buyers who went in with small deposits. Melbourne values are 7.3% lower than five years ago and Sydney’s are 1.5% below October 2021, so buyers from the last few years have far less room to absorb further falls. If that is you, the practical steps are boring but real: check your loan rate against what other lenders offer, keep an offset account topped up if you have one, and avoid selling in a panic unless you have to move. A paper loss only becomes a real loss when you sell.

It is also worth checking whether your lender will still pass on rate rises in full. After the September rise, all four major banks passed it on in full. CBA expects the cash rate to sit at 4.85% after today, with two quarter-point cuts pencilled in for August and November 2027, though it stresses the timing is highly uncertain.

What it means if you are buying

Buyers finally have something they have not had for years: choice and bargaining power. More stock to choose from, longer selling times and discounts of nearly 5% mean genuine room to negotiate, particularly in Brisbane, Perth and Sydney.

The catch is borrowing capacity. Higher rates mean the bank will lend you less than it would have a year ago, and that can easily wipe out the benefit of a lower price. Before you fall in love with a property, get a fresh pre-approval based on today’s rates, not last year’s. And remember that CBA is forecasting stabilisation, not a quick rebound, so buying because you expect a fast profit is a gamble, not a plan.

Units are worth a look too. PropTrack found units fell just 0.2% over the year compared with 2.4% for houses, and regional prices slipped only 0.1% in October and remain 3.1% higher than a year ago. If a house in the capital is out of reach, a unit or a regional move may hold its value better.

What it means for investors

There is one silver lining in CBA’s update: rental yields. Gross rental yields across the combined capitals have climbed to 3.77%, the highest since May 2015, and CBA expects the national yield to rise from around 3.75% to about 4.75% by late 2027 as prices fall and rents keep growing.

That does not mean investment properties suddenly pay for themselves. Cotality’s Tim Lawless notes yields are still well short of delivering neutral cash flow once insurance, strata, maintenance and higher rates are counted. Investors also need to factor in the changes to negative gearing and capital gains tax announced in the May Budget, which take effect from July next year. New investor loan commitments already fell 8.6% in the June quarter, the sharpest quarterly drop since September 2022.

What could change the forecast

Forecasts are not promises, and CBA has already revised this one twice in two months. Three things could shift it again:

• Interest rates. If rates stay higher for longer, the wait for a recovery stretches out. If the pencilled-in 2027 cuts arrive on time, stabilisation comes sooner.
• The economy. CBA now expects annual GDP growth to slow to 1% by mid-2027 and unemployment to peak at 5.1% at the end of next year. A weaker jobs market would mean more forced sales and deeper falls.
• Supply. A persistent shortage of new homes is the main floor under prices. If building picks up sharply, that floor gets firmer; if it stalls, the floor stays where it is.

Frequently asked questions

Will my home lose 14%?

Not necessarily. The 14% figure is a national average from peak to trough, and about half of it has already happened. Your suburb, property type and purchase date matter more than the national average. Houses in Brisbane and Perth face bigger falls than units or regional homes.

Should I wait to buy?

If you have a stable deposit, secure income and a home you plan to keep for years, timing the exact bottom matters less than buying well: the right property, at a negotiated price, with a loan you can afford at today’s rates. If you are stretching to buy at the limit of your borrowing capacity, waiting and saving a bigger buffer is the safer move.

Will rents fall too?

Nothing in CBA’s update suggests so. Rents are still growing strongly, which is exactly why rental yields are forecast to rise even as prices fall. Falling prices plus steady rents is good news for tenants hoping to buy, and mixed news for renters who are not.

Is a 14% fall a crash?

It would be the steepest fall in CBA’s 45-year series, beating the 8.6% slide of 2017–19. But it would still be a correction spread over roughly two years, not an overnight collapse, and CBA expects the market to stabilise rather than keep falling.

The bottom line

CBA’s forecast is a warning, not a verdict. Prices are falling faster than even the country’s biggest lender expected, Brisbane and Perth face the steepest drops, and recent buyers are the most exposed. But the same forecast sees the market finding its feet in the second half of 2027, with supply shortages and rising rents putting a floor under values. Whether you own, buy or invest, the smart response is the same: check your numbers at today’s interest rates, negotiate hard, and don’t make a rushed decision based on a scary headline.

This article is general information only and is not personal financial or property advice. Consider speaking with a licensed financial adviser or mortgage broker about your own situation.