CBA Forecasts 14% National Home Price Drop Amid RBA Hikes

Australia’s housing downturn could become the largest on record, with Commonwealth Bank economists now forecasting national dwelling values to fall around 14% from peak to trough. The bank has also lifted its expected decline for Melbourne to about 13%.

The downgrade follows the Reserve Bank’s November decision to raise the cash rate to 4.85%, its fifth increase of 2026 and the highest level since 2008. The RBA says inflation remains too high and is expected to stay above target for longer.

Higher interest rates reduce borrowing capacity and increase repayments, placing further pressure on buyers, homeowners and investors. CommBank estimates the latest rate increase will also extend the housing correction into 2027.

For Melbourne’s western growth corridor, this could mean continued price pressure and more cautious buyer behaviour. Properties may take longer to sell, while buyers with secure finance could gain greater negotiating power.

Investors will need to pay closer attention to finance costs, rental yields and cash flow. A lower purchase price may create opportunities, but higher mortgage rates can quickly reduce the benefit of buying cheaper.

For sellers, realistic pricing will become increasingly important if values continue to soften. Homes priced according to earlier market peaks may struggle to attract buyers operating with smaller lending limits.

Overall, CommBank’s new forecast points to a more challenging property market ahead. In Melbourne’s west, financially prepared buyers may find opportunities, but homeowners and investors should plan for the possibility of further price falls and sustained high borrowing costs.