Australia’s property market is changing, but one theme is becoming increasingly clear, affordability matters more than ever.
As borrowing costs remain elevated and household budgets continue to be tested, buyers are becoming more selective about where they put their money. And according to the latest Cotality data, that is showing up in the performance of different parts of the housing market.
The most expensive properties are generally experiencing the greatest falls, while lower-priced homes and units have shown greater resilience.
That doesn’t mean affordable property is immune to market pressures. The latest Cotality data says the gap between higher and lower-priced housing has begun to narrow as the downturn broadens.
But the relative resilience of more affordable property highlights an important point for buyers and sellers, price really matters.
Affordability Is Shaping Buyer Decisions
For much of the recent property cycle, buyers have had to contend with rapidly rising prices. In 2026, the equation is different.
Higher interest rates and tighter borrowing capacity mean buyers can’t necessarily stretch their budgets as far as they once could. Cotality reported in June that the annual household income required to service a lower-quartile house had risen by $14,500 in both Brisbane and Perth between January and May.
That creates a natural shift in buyer behaviour.
Instead of asking, “What is the biggest or best property I can afford?”, buyers may increasingly be asking, “What property gives me the best value within my budget?”
That distinction is important.
The Top End Is Feeling More Pressure
Cotality’s September 2026 Housing Chart Pack shows just how significant the difference has become.
Upper-quartile house values in Sydney are now 10.7% below their peak, while Melbourne’s upper-quartile houses are 10.5% below peak levels. Cotality says the sharpest declines have generally been concentrated among higher-value properties.
By comparison, lower-priced properties have generally held up better.
The difference is particularly noticeable in Sydney and Melbourne, where the gap between the performance of upper and lower-quartile houses has reached 5.3 percentage points and 6.6 percentage points respectively.
Why?
Quite simply, the pool of potential buyers becomes smaller as prices rise.
A property at the more affordable end of a market can potentially appeal to first-home buyers, investors, downsizers and owner-occupiers looking to keep borrowing under control.
A prestige property has a much narrower pool of buyers who can comfortably afford it.
Units Are Benefiting From The Affordability Equation
Units are also showing relative resilience.
Cotality says units have generally performed better through the downturn because of their lower entry prices and relative affordability. While higher-value units have tended to experience larger falls, the gap between price segments is smaller than it is for detached houses.
This is understandable.
For buyers who want to live in a particular suburb but can’t comfortably afford a house, a unit can provide an alternative way into that location.
It can also allow buyers to reduce the amount they need to borrow.
But affordability doesn’t mean buyers should overlook the fundamentals. Location, building quality, owners corporation costs, rental demand, supply and future resale appeal still matter.
Buyers Are Looking For Value, Not Simply Low Prices
It’s important to distinguish between cheap property and affordable property.
The cheapest property isn’t necessarily the best value.
A genuinely attractive affordable property might offer a combination of reasonable purchase price, manageable repayments, good location, practical accommodation and ongoing demand.
For an owner-occupier, that could mean choosing a smaller home in an established suburb rather than stretching financially for a larger property further from employment and amenities.
For an investor, it might mean looking for a property that balances purchase price with rental demand and ongoing costs.
The numbers need to work beyond the initial purchase.
What Does This Mean For Buyers?
For buyers, the current market can provide an opportunity to rethink priorities.
Instead of focusing exclusively on what a property is worth today, consider what it costs to own.
Allow for mortgage repayments, insurance, rates, maintenance, owners corporation fees where applicable and other ongoing expenses.
It can also be worth comparing several property types.
If a house is outside your comfortable budget, would a townhouse or unit provide a better financial fit?
Could a slightly smaller property in a better-established location make more sense?
Could you buy something that meets your needs now and potentially improve it over time?
These are personal decisions, but the current market makes them increasingly relevant.
What Does It Mean For Sellers?
Affordability is important for sellers, too.
If your property sits at the more affordable end of the market, you may be competing for buyers who have fewer choices within their budget.
That doesn’t mean you should assume your property will automatically attract strong competition.
Presentation, pricing and marketing remain important.
For sellers of higher-value properties, understanding the size of the potential buyer pool becomes particularly important. The latest Cotality figures suggest buyers at the upper end are more sensitive to borrowing constraints and changing market conditions.
A realistic understanding of the market can therefore be more valuable than simply looking at what a property sold for during the peak of the cycle.
The Market is Becoming More Selective
Cotality’s latest data shows the broader downturn is now affecting a much larger proportion of the market. National dwelling values fell 0.9% in August, taking values 3.6% below the March peak, while 93% of capital-city suburbs recorded a decline during winter.
But even within a softer market, not every property is behaving the same way.
That’s perhaps the most useful lesson for consumers.
Rather than thinking about the Australian property market as one single market, buyers and sellers need to consider the individual location, property type and price bracket.
Affordability Could Remain A Key Differentiator
With household budgets under pressure, affordability is likely to remain an important factor in property decisions.
For buyers, that means understanding your comfortable budget rather than simply borrowing to your maximum capacity.
For sellers, it means understanding where your property sits within the local market and who can realistically afford it.
And for anyone watching the market, the latest Cotality figures reinforce an important point: when borrowing capacity is constrained, demand doesn’t necessarily disappear, it can move towards the parts of the market buyers can afford.
In 2026, that is helping lower-priced homes and units hold their ground better than many prestige properties.
For consumers, the takeaway is practical. Don’t focus solely on whether prices are rising or falling. Look at what buyers can afford, what they are choosing and why.
In today’s property market, value isn’t simply about finding the lowest price. It’s about finding the right property at a price that makes sense for the way you live and the budget you can comfortably manage.
Want to have a more detailed discussion about your property path? Contact an Elders Agent in your area here.