The downturn has now reached 93 per cent of suburbs

Sydney has been leading the falls.

Values dropped another 1.4% in August, taking prices 7.1% below their February peak.

Melbourne has also been hit hard, with values falling 1.1% in August.

But it is not just the two biggest markets anymore.

Perth and Hobart recorded their first falls of this downturn in August, while Brisbane, Adelaide and Canberra have also been declining.

Darwin is now the only capital city that has managed to record growth over the past three months.

That 93% figure shows just how far the downturn has spread and that this is no longer a small correction happening in a few suburbs.

Why are prices falling?

A big part of it comes down to borrowing power. Interest rates have risen, which means buyers cannot borrow as much as they could before. That reduces what they can afford to pay. At the same time, buyer demand has softened.

There are also changes to property tax rules around negative gearing and capital gains tax, which have added another layer of uncertainty for investors.

Putting all of that together, buyers are becoming more cautious. And when buyers pull back, sellers must adjust.

Buyers are getting more choice

This is one of the more important changes happening in the market: when demand is strong, a good property can attract multiple buyers. Sellers have the upper hand and buyers have to move quickly.

This is changing. More properties are sitting on the market for longer, giving buyers more options and more room to negotiate.

That does not mean every seller will suddenly accept a huge discount. But it does mean buyers do not have to chase properties in the same way they did when the market was rising quickly.

And that means I would be a lot more selective about what I buy.

A falling market does not mean everything is cheap

The lower price can be tempting, but that does not make every property a good buy and that is why investors need to be careful.

A property being 5 or 10% cheaper than it was six months ago does not automatically make it a good investment.

You can buy something that falls another 10% after you buy it.

You can also buy a property in a suburb where prices are falling, but rents are weak, vacancy is high and there is plenty of competing stock.

That is not necessarily an opportunity, because a price fall alone does not tell you whether you are getting a good deal.

Look at what is still holding up

Even in a weaker market, not every part of the housing market behaves the same way.

Cotality’s data shows regional markets and more affordable parts of the market have generally been more resilient than the expensive capital city markets.

When borrowing capacity falls, affordability becomes more important. A buyer who could previously afford an $1 million property might now be looking at something closer to $800,000, but that does not mean they stop buying altogether, but instead they just change what they buy.

This is one reason I would not look at the national market and assume every property is going to behave the same way.

A softer market can actually be useful if you are buying with a long-term view.

You have more time to do your due diligence.

You can negotiate.

And you are less likely to be caught up in the pressure of having to make an offer immediately because five other buyers are interested. But I would use that extra negotiating power carefully.

I would rather buy a good property in a weaker market than a poor property simply because it looks cheap.

The things I would still focus on are the same:

• Is there genuine demand for the property?
• Are rents supported by the local market?
• Is there limited competing supply?
• Would owner-occupiers also want to buy it?
• Can I hold it comfortably if prices fall further?

The market could get weaker before it gets better

I would not assume we have reached the bottom.

Cotality’s national index is now 3.6% below its March peak, and economists expect further falls if interest rates continue to rise.

That means there is a chance buyers who wait could get better prices later.

But trying to pick the exact bottom is almost impossible. By the time the data tells you the market has turned, prices will already have started moving. So for an investor, the question is whether the numbers work at today’s price, not whether prices will fall further.

What I would do

I would not be trying to predict which month property prices will stop falling.

I would be looking for areas where the fundamentals are still strong.

Good employment. Strong rental demand. Limited competing supply. Properties that appeal to more than just investors.

And I would be looking closely at the price.

A falling market gives you something a rising market does not: the ability to negotiate. If a property is genuinely good and the numbers work, you do not necessarily need to wait for the perfect bottom. You just need to make sure you are not paying a price that requires the market to keep going up for the investment to work.

Final word

The 93% of capital city suburbs recording falls is a big number. The market has clearly changed.

But I do not think the lesson is that property is suddenly a bad investment. The lesson is that the market is giving buyers more choice, which makes being selective more important.

When prices are rising quickly, a rising tide can hide a lot of mistakes. When the market turns, you start to see which properties actually have demand behind them.

So i would be paying attention to not just where prices have fallen, but where the underlying demand is still strong.