More than half of Australia’s property professionals say their local housing markets are declining, with NAB’s latest survey revealing a sharp deterioration in sentiment, falling price expectations and growing pressure on first home buyers and developers.
Australia’s real estate industry has delivered its weakest assessment of the housing market in six years, with more than half of property professionals reporting declining conditions and expectations for national house prices falling further into negative territory.
The latest NAB Residential Property Survey reveals the bank’s Residential Property Index dropped 18 points to -4 in the September quarter, its third consecutive quarterly decline and the first negative reading since the pandemic.
The result is well below the long-term average of +22 and marks a significant turnaround from the above-average sentiment recorded throughout much of 2025.
Property professionals now expect national house prices to fall 4.2 per cent over the next 12 months, compared with the 2.5 per cent decline forecast in the June quarter, while expectations for annual price growth in two years’ time have also deteriorated to -1.9 per cent.
The findings suggest the industry is preparing for a more difficult selling environment, with 53 per cent of respondents describing their local housing market as declining, up from 33 per cent three months earlier.
A further 14 per cent believe their market is starting to decline, while 13 per cent say conditions are approaching the bottom, up from just 4 per cent in the previous quarter.
The survey, which canvassed approximately 228 real estate agents, property managers, developers, fund managers and investors, reveals a widespread loss of confidence, although the outlook varies considerably between states.
NSW recorded the weakest sentiment, with its Residential Property Index plunging from +3 to -22, while Queensland fell from +24 to -9 and Victoria slipped further into negative territory, from -3 to -5.
Western Australia remained positive at +22, although that was down from +38 in the June quarter, while South Australia’s index fell sharply from +43 to zero.
The deterioration has also flowed through to expectations for the year ahead, with the national forward-looking confidence index falling 13 points to just +2, its weakest reading since the pandemic.
NSW again recorded the lowest result at -11, while Queensland slipped to -1, suggesting property professionals in both states anticipate continued pressure on market conditions.
The most pessimistic house price expectations are in South Australia, where respondents forecast a 5.4 per cent decline over the next 12 months, followed by NSW at 5.1 per cent and Victoria at 4.8 per cent.
Queensland professionals expect prices to fall 3.9 per cent, while Western Australian respondents anticipate a 2.9 per cent reduction.
Tasmania is the notable exception, with respondents forecasting price growth of 4.6 per cent over the next year, while the ACT is expected to record a marginal increase of 0.1 per cent.
Importantly, the figures represent the average expectations of property professionals surveyed by NAB, rather than actual price movements or the bank’s own house price forecasts.
While expectations for property values have weakened, the outlook for rents remains considerably stronger, highlighting the continuing imbalance between housing demand and supply.
Nationally, respondents expect rents to rise 3.7 per cent over the next 12 months, only slightly below the 3.9 per cent forecast in June.
Western Australia and South Australia lead rental growth expectations at 6.4 per cent, while NSW has the weakest outlook at 2.2 per cent.
Looking two years ahead, respondents anticipate annual rental growth of 4 per cent nationally, with Western Australia expected to record the strongest increase at 7.8 per cent.
The survey also reveals a significant change in buyer activity, with established owner-occupiers accounting for a growing share of transactions as first home buyer participation weakens.
In the established housing market, owner-occupiers excluding first home buyers represented 45.6 per cent of purchases, up from 43.2 per cent in the June quarter.
Over the same period, the combined share of first home buyers purchasing to occupy or invest fell from 39 per cent to 34.4 per cent, while local investors increased their share slightly from 13.7 per cent to 14.7 per cent.
The shift was even more pronounced in the new housing market, where first home buyers accounted for 25.2 per cent of purchases, down sharply from 38.6 per cent three months earlier.
Established owner-occupiers increased their share of new property purchases from 37.8 per cent to 49.8 per cent, placing them well above their long-term average.
Local investors also increased their share of new housing purchases to 16.4 per cent, up from 14.8 per cent in the June quarter, while foreign buyers accounted for 7.6 per cent.
For agents working with buyers, the survey suggests finance conditions are becoming a more significant obstacle than property prices themselves.
Interest rates remained the biggest constraint on established home buyers for the second consecutive quarter, followed by access to credit.
Returns available on alternative investments have become the third-largest constraint, while the level of property prices, which had been the leading obstacle during 2025, has slipped to fourth place.
The findings point to a market where purchasing capacity and the cost of finance are playing an increasingly important role in determining buyer activity, even as expectations for house prices continue to fall.
Developers are facing a similarly challenging environment, with construction costs remaining the biggest impediment to starting new housing projects.
More than three-quarters of respondents, or 77 per cent, identified construction costs as a barrier, while the proportion citing interest rates jumped from 39.6 per cent to 58.3 per cent in just three months.
Interest rates have now overtaken planning permit delays, cited by 54.1 per cent of respondents, as the second-largest constraint on new developments for the first time since the December quarter of 2023.
The pressure is particularly acute in Western Australia, where all respondents in the state’s development sample identified construction costs as a barrier, while 67 per cent cited interest rates and the same proportion pointed to planning delays.
In Queensland, planning delays remain the second-biggest obstacle after construction costs, highlighting the different challenges facing developers across the country.
The findings suggest the industry faces a difficult combination of weaker price expectations and persistent supply constraints, with financing and building costs continuing to affect the feasibility of new projects.
NAB also examined the impact of stamp duty on housing market activity, with respondents identifying the tax as a significant obstacle to mobility.
Two-thirds of property professionals believe stamp duty creates a barrier for first or newer home buyers, while 61 per cent say it encourages homeowners to remain in their existing properties rather than move.
Another 43 per cent believe it discourages downsizing, potentially limiting the number of larger established homes returning to the market.
The concerns were particularly pronounced in Western Australia, where 78 per cent identified stamp duty as a barrier for first or newer home buyers and 57 per cent said it discouraged downsizing.
The results come as property professionals also reassess the likely impact of the Federal Government’s 5 per cent deposit scheme, with expectations for its effect on house prices easing.
For real estate professionals, the latest survey points to an increasingly challenging operating environment, with sellers facing softer price expectations, buyers constrained by borrowing costs and developers continuing to struggle with the expense of delivering new homes.
Yet the continued expectation of rental growth suggests underlying housing pressures have not disappeared, even as confidence in the sales market weakens.
With the Residential Property Index now below zero for the first time in six years, the survey suggests the industry is entering a markedly different phase of the housing cycle, one in which realistic pricing, access to finance and the ability to bring new supply to market will be increasingly important.