Australia's mid-sized housing markets enjoy a substantial buffer against the ongoing downturn in home values, while Melbourne has the smallest buffer of any major capital city, according to a Cotality analysis published Friday.

The analysis models what dwelling value declines ranging from 5% to 20% would mean for major capitals, finding that the mid-sized capitals of Perth, Brisbane, and Adelaide would retain much of the value they gained during recent housing booms.

Even if Perth's housing market fell 20% from its peak, its median dwelling value would still be roughly where it was in April 2025. Brisbane could also absorb a 20% correction and values would still be around August 2024 levels, while a 20% decline in Adelaide would only return the city's housing market to around April 2024 levels, the analysis found.

In Sydney, where the housing market is already more than 5% below its peak, even a 20% downturn would only push the capital city back to around May 2021.

But in Melbourne, which has seen five years of subdued growth, a decline of more than 10% would return dwelling values to pre-pandemic levels, meaning the city has the least room to absorb further price falls.

Cotality noted that Australia's home value index fell 0.7% in July, marking the largest monthly drop since December 2022, while auction clearance rates fell to the low-40% range by the end of July from a peak of around 66% in February.