Two of Australia's most-watched forecasters looked at the same August downturn and the same rate risk, then split on how deep it goes: CBA sees a 9% fall, HSBC 13%. The gap is really a bet on the RBA.
Australia's banks have stopped arguing about whether house prices are falling. They are only arguing about how far. Commonwealth Bank this month pencilled in a peak-to-trough decline of about 9% in national dwelling values, roughly 10% across the five largest capital cities. HSBC's Paul Bloxham went further, downgrading his call to a 13% fall from 8%.
Both are staring at the same evidence: Cotality data showing combined capital city values already down 4.6% from their March 2026 peak, and a Reserve Bank that markets increasingly expect to hike again. HSBC's Bloxham says a fall that size would be the largest housing price correction in modern history.
CBA's 10% forecast across the five major capitals has separately been reported as the largest on record. For investors carrying variable-rate debt, the gap between 9% and 13% is not academic. It is the difference between a manageable dip and a serviceability problem.
The core data both banks are reading
According to Cotality, combined capital city dwelling values fell 3.7% over the August quarter and now sit 4.6% below their peak, the fifth straight monthly decline.
Nationally, values are still 2.7% higher than a year ago: this is a five-month story, not a 12-month one. Across the five major capitals, Cotality's daily index was off 5.2% from its 10 April peak as at 13 September.
For context, the record national downturn is a recent one: values fell 8.40% between May 2022 and January 2023, just edging the 8.38% decline from October 2017 to June 2019. Both forecasts would exceed the prior record.
The weakness is broad, not isolated: Cotality reports falls across the overwhelming majority of capital-city suburbs, and the median time to sell has lengthened, a classic sign of a market where buyers hold the leverage. That is the shared factual base. The disagreement begins with what happens next.
Where the forecasts split, and why
The gap is almost entirely a bet on the RBA. CBA's 9% assumes just one further rate hike, followed by two cuts in May and August 2027, a path CBA says would see prices stabilise and begin recovering during 2027.
HSBC assumes rates bite harder and for longer, with growth stalling into 2027 and no early relief, which is how it reaches 13%. The macro backdrop is doing the pushing. The cash rate sits at 4.35%, and NAB, Deutsche Bank and UBS all expect the RBA to lift it to 4.60% at the 29 September meeting.
On top of rates, three things are trimming demand at once: the May federal budget's changes to negative gearing and capital gains tax, tighter anti-money-laundering rules for real estate, and softer immigration. A
nnual net overseas migration is down 28.7% on the latest ABS figures, which run to June 2025. Read the same month, weight the rate risk differently, and you land on 9% or 13%.
What to watch this quarter
The next few weeks will do much to settle the argument. The RBA's September and November meetings are the swing factor: a hike pulls the market towards HSBC's 13%, while a hold with signs of easing validates CBA's shallower call.
Watch Cotality's monthly index for whether the pace of decline slows, the auction clearance rate for an early floor, and time-on-market for whether buyers keep the upper hand. The banks are not really disagreeing about the present. They are disagreeing about the RBA. Until that resolves, treat both numbers as scenarios to plan for, not forecasts to bank on.
