Combined Capital Values Have Fallen 8.1% in Seven Months Against a Record 8.2%. Cotality Puts the Capacity Loss at 11.5% — the Larger Number Is on Your File

What the October index actually said

Cotality released its Home Value Index for October on 2 November. The national measure fell 1.2% over the month, the seventh consecutive monthly decline, leaving values 6.7% below the March 2026 peak — a reduction of roughly $63,400 from the median dwelling value, on Cotality’s figures.

Across the combined capitals, the fall has reached 8.1% over seven months. The decline has also broadened. Brisbane led the monthly falls at 2.0%, followed by Perth at 1.7% and Sydney at 1.6%; Sydney is reported to be 10.1% below its February peak. Brisbane and Perth have now overtaken Sydney as the steepest monthly decliners, which is a reversal of the pattern that held through the first half of the year. Cotality research director Tim Lawless put the breadth of it plainly:

Houses are falling faster than units — 1.6% against 0.7% over the month, and 5.0% against 2.8% over the quarter. Transaction volumes have thinned considerably: sales over the three months to October were 23% lower than a year earlier and 18% below the previous five-year average, with Sydney down 30% and Brisbane down 29% year-on-year. Median time to sell sits at 39 days, the longest since August 2020, and vendor discounting is running at 4.7%, the widest since May 2019. Auction clearance rates have been consistently below 50% across the combined capitals.

One detail cuts against the usual downturn narrative. New listings are roughly 18% below average — vendors are not panicking into the market — yet total advertised capital city stock is at its highest level for this time of year since 2019. Inventory is building because buyers are absent, not because sellers are capitulating.

Why the speed matters more than the depth

An 8.1% fall is not, by itself, unprecedented. The largest peak-to-trough decline in combined capital city values on record is 8.2%, set over the 2017–19 downturn. What is different is the clock. Over the equivalent seven-month stretch of that earlier downturn, values had fallen just 1.2%. The 2022–23 downturn managed 7.0% over the same number of months. On Cotality’s reading, the current run is the fastest decline since its records began in the 1980s — roughly 40 years of data.

That distinction is not academic for brokers, and it is worth being precise about why. A slow 8% fall gives every participant in a transaction time to re-base: valuers, credit assessors, vendors, and the client’s own expectations all move together. A fast 8% fall means the inputs on a file go stale while the file is still open. The valuation, the LVR, the lender’s view of the security, and the client’s own sense of what their money buys can all be describing different months of the same year.

The arithmetic that undoes the “buyer’s market” pitch

Here is the number that deserves more attention than the headline. The RBA has lifted the cash rate four times in 2026, a total of 100 basis points, taking it to 4.60%. Writing in Property Update on 2 November, Lawless estimated that the rate-hiking cycle has reduced borrowing capacity by around 11.5%, or more than $105,000. (His phrasing bundles the cycle to date with the increase widely expected on 3 November, so treat it as an approximate range rather than a precise point estimate.)

Either way the comparison holds. Values are down 6.7% nationally. Capacity is down by something in the order of 11.5%. The gap between those two figures is the reason your pipeline has not improved in step with the market.

The composition of demand has shifted underneath this as well. New investor loan commitments fell 8.6% in the June quarter, which Cotality links to the investor tax settings in the May federal budget. Unemployment reached 4.7% in September, the highest since 2021 — still low enough, on Cotality’s commentary, to limit forced selling, but no longer a tailwind. So the two groups that would normally absorb a cheaper market are both constrained: investors by after-tax returns, owner-occupiers by serviceability.

Where this lands on a live file

The downturn reaches broker files through the security, not the borrower. Four places are worth checking deliberately.

1. LVR bands on anything approved and not yet settled

A valuation obtained before August in Brisbane or Perth is describing a market that has since moved 5.7% to 6.1% over a rolling quarter. A deal structured at 78% on an older valuation can present at a different band on a current one, and the consequences are not limited to pricing — they can reach mortgage insurance, which changes the cost of the recommendation rather than just its rate.

2. Equity-release and debt-consolidation files

Any file whose logic depends on available equity needs its assumptions re-tested against October figures, particularly in the mid-sized capitals where, on Lawless’s account, virtually every suburb in Brisbane, Perth and Adelaide has fallen over the past three months. The equity that justified the structure may be a smaller number than the file says it is.

3. Bridging and sell-then-buy sequencing

A 39-day median time to sell, sub-50% clearance rates and 4.7% vendor discounting all point the same way: the sale leg is taking longer and landing lower than it did a year ago. Where a file assumed a sale inside a particular window, the window is the assumption to re-test.

4. Pre-approvals written on an older assessment rate

A pre-approval is a capacity figure with a date on it. Given the scale of the capacity movement Cotality describes, a pre-approval written earlier in the cycle may be quoting a number the lender would not write today. The client may still be relying on it.

What RG 273 says about a file that has sat

ASIC’s guidance on the best interests duty does not have a clause about falling property markets. It does have guidance about delay, which is the mechanism by which a fast-moving market becomes a compliance question.

Read together, the practical reading is narrow but useful. The test in RG 273.122(b) is whether the information you relied on is still reasonably current. In most years, a market-wide movement would not disturb that. In a year where the combined capitals have moved 8.1% in seven months, the question of whether a valuation and an equity position from three months ago are “reasonably current” is a question with a real answer, and it is one a reviewer can ask after the fact.

Two caveats matter here, and they are not throat-clearing. First, RG 273.118 is explicit that the duty does not require a periodic review of existing clients, although it describes reviewing circumstances from time to time as good practice — so none of this creates an obligation to re-run your back book. Second, these paragraphs are general guidance, and how they apply to a particular file depends on the file. Your licensee or aggregator’s compliance team is the right place to settle that, not an article.

What is squarely within your control is the record. If you re-check a valuation assumption and conclude the original recommendation still holds, that conclusion is worth writing down, because RG 273.160 and RG 273.163 are about reasoning being visible. A file that shows the broker noticed the market had moved and tested the recommendation against it reads very differently from a file that is simply silent.

Three buckets to pull this week

This is a sorting exercise, not a re-write of your book. Most files will need nothing. The point is to know which ones might.

1. Approved, not settled, valuation older than 60 days

   Prioritise Brisbane, Perth and Adelaide, where the quarterly falls are steepest and the breadth is widest. Check the LVR band against a current view of value, and check whether a band change touches mortgage insurance or pricing. Note what you found either way.

2. Pre-approvals issued before the most recent assessment-rate change

   Identify which clients are actively house-hunting on a number that may no longer be available. A short, factual call — here is what your capacity looks like now, here is why it moved — is better received before an offer than after one.

3. Equity-dependent structures: releases, consolidations, bridging

   Re-test the equity assumption against October figures and the sale-timing assumption against a 39-day median. Where the structure no longer works, the alternatives you consider and set aside are part of the recommendation, and RG 273.104(b) contemplates recording the alternatives you presented.

One framing is worth carrying into client conversations this month. Falling values and falling capacity do not cancel out — they compound for the buyer who is waiting, and they diverge for the client who already owns. An existing owner with a loan already written has lost paper equity but kept their contracted borrowing. A prospective buyer has gained a cheaper target and lost more capacity than the target gained. Those are two different conversations, and conflating them is the easiest mistake to make in a market like this one.

What to watch next

The RBA Board’s November decision was scheduled for 3 November, the day after the Cotality release, with market pricing around an 85% probability of a further increase on Cotality’s account. At the time of writing that decision had not been handed down, and nothing in this article assumes an outcome. If a fifth increase does land, Cotality’s estimate is that the average owner-occupier variable rate moves to roughly 6.7%, with the capacity reduction at the upper end of the range described above.

Beyond the decision itself, three things are worth tracking. Whether the mid-sized capitals keep leading the falls, since that determines where valuation risk concentrates on your panel. Whether new listings stay suppressed, because the current inventory build is a demand story and would look quite different if vendors began arriving. And whether unemployment keeps drifting up from 4.7%, which is the variable Cotality itself flags as the one that would change the character of the downturn from an affordability correction into something harder.

Sources: Cotality Home Value Index, October 2026, released 2 November 2026 — reported by Cotality research director Tim Lawless in Property Update, “Housing downturn broadens as Brisbane and Perth lead the decline” (2 November 2026), and by Annie Kane, Broker Daily, “Capital city property prices plunge at fastest rate in 40 years” (2 November 2026). Sydney’s 10.1% peak-to-current fall and the full city-by-city October table are as reported by Broker Daily. The borrowing-capacity estimate is Cotality’s. Regulatory references are to ASIC Regulatory Guide 273, Mortgage brokers: Best interests duty (June 2020), paragraphs 273.104, 273.118, 273.121, 273.122, 273.160 and 273.163. Cash rate and 2026 rate-rise history per RBA decisions as reported; the November 2026 Board decision was scheduled for 3 November and had not been announced at the time of writing. All figures current as at 2 November 2026.