What did the Cotality May 2026 Home Value Index show?

The national Home Value Index was unchanged at 0.0% in May, the weakest monthly result in 12 months. Sydney fell 0.9% over the month and Melbourne fell 0.8%. Perth and Darwin led monthly gains at 1.5%, Brisbane and Hobart at 0.9%, Adelaide at 0.5% and Canberra at minus 0.2%. The release on 1 June 2026 was published by Cotality, the rebranded CoreLogic Australia data business.

Are Sydney and Melbourne in a property downturn?

On Cotality's measure, yes. Both cities are five consecutive months into a decline that began after the November 2025 cyclical peak. Sydney values are now 2.1% below peak and Melbourne values are 2.9% below peak. Estimated sales turnover is down 17% over the year in Sydney and 14.2% over the year in Melbourne. Cotality's Tim Lawless described affordability and serviceability pressures as 'near record highs' with the buyer pool narrowing at higher price points.

Which Australian capital city has the strongest property growth in 2026?

Perth. Cotality's May data put Perth dwelling values up 26.0% over the year, sitting at a new record high. Brisbane is up 19.7% over the year and Darwin is up 19.6%, both also at record highs. The gap between the fastest annual growth (Perth at 26%) and the slowest (Melbourne at 2.0%) is 24 percentage points, the widest divergence of this cycle.

How does the May 12 Budget affect investors buying in falling markets?

The 12 May 2026 Budget abolished negative gearing on established residential property for purchases after 7:30pm AEST that night, with effect from 1 July 2027. New residential builds are exempt. For an investor considering Sydney or Melbourne now that values have rolled over, the after-tax economics of established stock are materially worse than on 11 May, even with prices softening. Purchases exchanged before the cut-off remain grandfathered and can be negatively geared for as long as they are held.

What does a 0.9% monthly Sydney fall mean for an investor's loan-to-value ratio?

On a $1.3 million Sydney dwelling, a 0.9% month and a 2.1% peak-to-trough fall reduces the value by roughly $27,300. For an investor with an existing 80% LVR loan that was sized off the November 2025 peak, the LVR drifts to approximately 81.7% on paper. That is not a margin call event, but it can affect refinancing capacity, Lenders Mortgage Insurance triggers on a top-up and the cash-out limit on an equity release. Always confirm with your lender or broker.

Should I refinance my investment loan with prices falling and rates at 4.35%?

The decision is now lender-specific. With Sydney and Melbourne valuations softer, a refinance into a higher LVR is harder than three months ago. Investors in Brisbane, Perth, Adelaide and Darwin can still extract equity at record-high valuations, which is where most of the cash-out and renovation lending is now flowing. The cash rate is 4.35%, with the consensus of the big four banks now expecting no further hikes, although Westpac retains a 4.60% peak forecast.

Sydney values fell 0.9% in May, Melbourne 0.8%. Perth is still running at 26% over the year

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

Key takeaways

Cotality's Home Value Index for May 2026, released on 1 June, printed 0.0% nationally. That is the weakest monthly result in 12 months. The national HVI is being held flat by strong gains in the mid-sized capitals offsetting falls in Sydney and Melbourne.
Sydney fell 0.9% over the month and Melbourne fell 0.8%. Both cities are now five months into decline, with Sydney 2.1% below its November 2025 peak and Melbourne 2.9% below peak. Estimated sales are down 17% over the year in Sydney and 14.2% over the year in Melbourne.
Perth values rose 1.5% over the month and are up 26.0% over the year, a fresh record high. Brisbane is up 19.7% annually and Darwin 19.6%, both also at record highs. Adelaide is up 11.4% over the year and Hobart 9.3%.
The capital city divergence is now 24 percentage points between the fastest (Perth) and slowest (Melbourne at +2.0% annually). That is the widest gap of this cycle.
New listings ran 22.4% above the same period last year and 4.7% above the five-year average, with the median vendor discount widening to 3.1%, the highest since 2022. Capital city auction clearance hovered around 50% in late May.
Cotality research director Tim Lawless attributed the cooling to affordability and serviceability pressures near record highs, with the buyer pool narrowing at higher price points where borrowing limits are most binding.
For investors, the falling east coast plus the 12 May negative gearing change on established residential creates an awkward window: lower entry prices in Sydney and Melbourne, but materially worse after-tax economics on any purchase after 7:30pm on 12 May 2026. Pre-cut-off contracts remain grandfathered.

This article is general information only and does not constitute financial, tax, or investment advice.

The June 1 release of Cotality's national Home Value Index put the headline reading at 0.0% for May 2026. That is the cleanest pause we have seen in twelve months, but it is hiding two stories that move in opposite directions.

In Sydney and Melbourne, the housing market has now spent five consecutive months going backwards. In Perth, Brisbane and Darwin, values are still setting fresh record highs. The 24 percentage point gap between the fastest and slowest capital is the widest of this cycle, and it changes how an investor should be reading both their equity position and their next purchase.

What the May 2026 HVI actually said

The national reading of 0.0% in May follows 0.3% in April. The deceleration has been steady since January, when the index rolled in at 0.8% for the month. Twelve months ago, the national index was running close to 1.0% per month. The cycle has clearly turned, but not uniformly.

The capital city breakdown for May 2026, on Cotality's hedonic dwelling measure:

Sydney: minus 0.9% for the month, plus 4.8% over the year. Median dwelling value $1,295,387. Now 2.1% below the November 2025 peak.
Melbourne: minus 0.8% for the month, plus 2.0% over the year. Now 2.9% below the November 2025 peak.
Brisbane: plus 0.9% for the month, plus 19.7% over the year. New record high.
Adelaide: plus 0.5% for the month, plus 11.4% over the year. Median dwelling value $937,021.
Perth: plus 1.5% for the month, plus 26.0% over the year. New record high.
Hobart: plus 0.9% for the month, plus 9.3% over the year. Median dwelling value $752,398.
Darwin: plus 1.5% for the month, plus 19.6% over the year. New record high.
Canberra: minus 0.2% for the month, plus 4.3% over the year. Median dwelling value $898,242.

National median dwelling value: $941,864. Combined capital cities median: $1,030,973. Combined regional median: $771,365.

The headline that matters is the spread between Perth at plus 26.0% annually and Melbourne at plus 2.0%. That is 24 percentage points of divergence in a single asset class across a single country, and it is the second consecutive month it has set a new cycle high.

Sydney and Melbourne: five months into the early phase

Cotality's research director Tim Lawless was direct on the trajectory:

Sydney and Melbourne are already five months into the early phases of decline, while growth is slowing across the mid-sized capitals. Listings are picking up as demand softens, interest rates are rising while affordability and serviceability pressures are biting.

The supporting numbers line up with that read. Estimated transactions in Sydney are down 17% over the year. Melbourne sales are down 14.2% over the year. New listings nationally are running 22.4% above the same period last year and 4.7% above the five-year average. The median vendor discount across the combined capitals has widened to 3.1%, the highest reading since 2022.

The capital city auction clearance rate hovered around 50% through the second half of May. A 50% clearance rate is the level at which markets typically transition from price growth to price decline, which is what the Sydney and Melbourne data is now confirming.

The narrowing of buyer pools at higher price points is the part of the Lawless commentary that property investors should be marking. Lenders' serviceability buffers are still calculated at the assessment rate (typically the customer rate plus a 3.0% APRA buffer), which means a 4.35% standard variable assessed at 7.35% caps borrowing capacity well below where it sat in 2023. That cap binds first on the upper deciles of the Sydney and Melbourne markets, which is exactly where the price falls are concentrated.

The two-speed economy is now a two-speed housing market

Perth, Brisbane and Darwin are still printing record highs because the drivers of those three markets sit outside the affordability constraint that has caught Sydney and Melbourne.

Perth is benefitting from the iron ore and lithium capex cycle plus net interstate migration. Brisbane is absorbing Sydney and Melbourne refugees plus the Olympics infrastructure spend. Darwin is small enough that defence and gas-sector hiring can move the median by 1.5% in a single month.

Hobart's plus 9.3% annual print and Adelaide's plus 11.4% sit between the two extremes. Canberra's minus 0.2% monthly reading puts the federal capital in the company of Sydney and Melbourne, though the annual change of plus 4.3% is still positive on a year-ago base.

The investor implication is that the national HVI of 0.0% does not describe a real portfolio. If your two investment properties are in Brisbane and Perth, your aggregate value is still rising at close to 20% per year. If they are in inner-ring Sydney and Melbourne, you are now five months into a soft correction.

What the listings build means for the spring market

Total advertised stock has moved from minus 22% versus a year ago in early 2025 to minus 2.6% in May 2026. That is the supply side catching up, and it matters because the binding constraint on rental and sale markets for the last three years has been stock scarcity. New listings at 22.4% above last year and 4.7% above the five-year average suggest the spring 2026 market will land with more choice for buyers than the spring 2025 market did, which compounds the affordability pressure already showing up in Sydney and Melbourne.

For landlords, a 3.1% median vendor discount means the asking-to-selling gap has roughly doubled from the 1.5% to 2.0% range that ran through 2024 and most of 2025. A vendor planning to sell an investment property to crystallise gains before the 1 July 2027 CGT regime change needs to plan for a longer days-on-market and a price discount on listing.

The 12 May Budget overlay: timing the next purchase

The May 12 Budget changed the after-tax economics for any investor purchasing established residential property after 7:30pm AEST on the same day. From 1 July 2027, net rental losses on those properties can only be carried forward, not offset against other income. New residential builds remain exempt.

That overlay matters now for two reasons. First, falling Sydney and Melbourne values would normally pull bargain-hunters into the market. The 12 May change reduces the appetite of negatively geared buyers for established stock at exactly the moment that established stock is becoming better value. Second, the grace period between 12 May 2026 and 30 June 2027 still allows negative gearing on post-Budget purchases until the end of 2026-27, but not in later years.

If you are an investor weighing a Sydney or Melbourne purchase right now, the calculation is not just about whether prices have further to fall. It is also about whether the after-tax return on a 14-month lease, with negative gearing for one financial year, can compete with a new-build purchase where both negative gearing and the existing 50% CGT discount are preserved.

For pre-12 May contracts that are grandfathered, the falling values in Sydney and Melbourne are a paper hit, not a structural change in tax position. Keep the documentation.

What the rates picture is doing on top

The RBA cash rate sits at 4.35% after the 5 May 2026 hike. The June 16 RBA meeting is expected by three of the big four banks (CBA, ANZ, NAB) to deliver a hold. Westpac retains its forecast for a further hike to a 4.60% peak.

A pause in June would be the first since February 2026. For Sydney and Melbourne values, even a pause would be a stabilising signal, since the marginal buyer in those markets is the one most exposed to serviceability buffers. A fourth hike would lock in the trend that Cotality's May data has just confirmed.

The compounding factor for investors is the rental side. SQM Research's April vacancy data showed the national vacancy rate rising from 1.0% to 1.2% (the first material rise in 12 months) while asking rents stayed up 7.3% annually. Cotality's gross rental yield expanded to 3.59% nationally in April, the first yield expansion of this cycle. The May HVI flatlining for the national index, with capitals like Sydney and Melbourne now in decline while rents stay elevated, will push that yield expansion further in the next monthly print.

A practical landlord checklist for the next 60 days

Reprice your portfolio. Use Cotality's hedonic median for your suburb, not the headline national index. A Brisbane or Perth landlord is up 19% to 26% over the year. A Sydney or Melbourne landlord is 2% to 3% below the November 2025 peak. Update your loan-to-value ratio calculation accordingly.
Stress-test refinancing windows. If you held off refinancing in Sydney or Melbourne earlier this year, the valuation now is lower than three months ago. Pull a current valuation before applying. If you are in Brisbane, Perth or Darwin, the equity release window remains open at record-high valuations, but watch APRA's 7.35% serviceability assessment cap.
Confirm your 12 May 2026 status. If you exchanged contracts before 7:30pm AEST, your property is grandfathered for negative gearing under the existing rules. Keep contract notes, deposit receipts and the conveyancer's correspondence. Post-cut-off purchases are subject to the 1 July 2027 change.
Recalculate land tax exposure. With QLD, SA and WA all assessing on 30 June 2026, the rapid Brisbane and Perth gains are pulling some investors over thresholds for the first time. See the 30 June land tax breakdown.
Decide on the spring listing. If you intend to sell an east coast investment before the 1 July 2027 CGT regime change, listings volume in spring 2026 looks heavier than 2025. A pre-spring private sale or off-market campaign may avoid the build in inventory.

Where Propkt fits

Tracking the gap between your purchase price, current Cotality estimate, loan balance and serviceability buffer is the kind of admin that gets harder as a portfolio grows. Propkt's mortgage calculator updates payments against the current 4.35% cash rate, the expense tracker tags land tax and insurance against the property they belong to, and the rent management module flags renewals coming up against the affordability data that is now binding in Sydney and Melbourne.

If the May HVI has prompted a decision about whether to refinance, list, hold or buy your next investment, modelling the cash flow against current rates and current valuations is the first step. Sign up at propkt.com to bring the numbers together in one place.