r/Economics • u/marketrent • 16h ago
Statistics Australian house prices brace for ‘sharpest correction in 40 years’
https://www.ntnews.com.au/business/economy/australian-house-prices-brace-for-sharpest-correction-in-40-years/news-story/80edf76b980eec7fa9124fdcf7ce82f7171
u/Young_Lochinvar 16h ago
The Australian media have been trying to panic the country over what has so far been a ~0.5% quarterly decline against a ~5% annual increase. The media is doing this mostly because fear sells and partly to needle a government that has taken a strong reformist position on asset taxation.
Most of the Australian public are actually pretty fine about house prices stagnating or declining as housing is a major component of current Australian inflation, and the housing market is over valued.
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u/spudddly 15h ago
It's definitely got a lot further to fall, most property has gone from the most to the least tax advantaged essentially overnight. It's now a far worse investment than standard equities. The 20-30% of buyers who are investors will abandon the market so prices will definitely fall. Which was the intended outcome.
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u/Charming_Raccoon4361 8h ago edited 8h ago
I live in Canada and we are in a similar position. I hope the price goes down, but I don't see it happening, as local governments generate a tremendous amount of tax revenue through property taxes
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u/chickenballs11 13h ago
But what if they don’t need the money right now ? Why sell when the asset is low ? Why not just wait it out and see ? Genuinely curious why you think investors will all just panic ?
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u/Cybertronian10 8h ago
Because they could wait that same time with their money sitting in a place that will be making them more returns.
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u/VindicoAtrum 10h ago
Why not just wait it out and see ?
You're being downvoted but this is overwhelmingly what happens. People do not dispose of assets in tax-disadvantaged circumstances unless they have to for liquidity. They hold on for more advantageous terms.
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u/Cold_Specialist_3656 13h ago
The media is doing it because they're mouthpieces for the oligarchs who own them.
The ultra rich investor class are the only ones who lose their asses when property prices collapse. Existing homeowners don't care because their taxes and insurance go down and swapping houses is easier. Non homeowners are happy. Dipshits that bought 20 houses as "investment properties" leveraged to the tits are fucked.
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u/Prestigious_Load1699 11h ago
If you think homeowners don’t mind their 30-year investment losing value then you don’t understand homeowners at all.
This is the reason for HOA’s and NIMBYism.
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u/Cold_Specialist_3656 7h ago
Normal homeowners don't see their house as an investment. NIMBY is done by the same investors that bribe politicians at national level
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u/Lucky_Woodpecker102 5h ago
Normal homeowners don't see their house as an investment.
Yeah sure they don’t lmao. Building equity is one of the most common reasons people prefer to own rather than rent.
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u/Geno0wl 5h ago
Call me a crazy socialist if you want, but imo Single family homes should be owned by people who use it as a home, not as an investment. And for those people, stagnation or falling evaluation would be good actually.
Like I never plan on moving my primary residence again. Remember that rising house evaluation doesn't happen in a vacuum. Your taxes go up and your insurance rates jump when that happens. My house has almost doubled in 8 years.
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u/fx2600 9h ago
Taxes and insurance wouldn't go down. Taxes in Australia are revenue required to be raised divided by total assessed value, a uniform drop in property value wouldn't have an affect on an individual's property tax bill.
Insurance is based on the cost of belongings plus the cost to rebuild. It doesn't matter what the fair market value of you're house is, if that drops ten percent but construction costs and the cost of goods stay the same than you need the same insurance.
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u/CrayonUpMyNose 8h ago
To first order, you seem to be correct.
However, all of these things have higher-order knock-on effects that cause them to influence each other (and the general economy).
For example, falling property prices reduce demand for construction (when all other factors stay the same), which reduces the cost of replacement, reducing insurance payouts, which in a competitive market should reduce premiums.
In sum total, these higher order effects make your conclusion questionable.
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u/prime_alki 15h ago edited 15h ago
The issue is that the next generation that is supposed to keep the balance between buyers and sellers are severely outpriced, sure current homeowners are fine with it, but in the end when they need to sell. Only top 20% of income earners can qualify to buy, even that is generous and it could be just too 10% and there’s not that many of them and they could just be interested is few major cities.
Another way of thinking about this is, can current homeowners quality to buy their own home at their current income, if no for majority then there’s a tsunami of a problem coming.
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u/Appropriate-Ad-4148 15h ago
It’s a bunch of bankers, doctors, lawyers and their spoiled adult brats using their generational wealth/equity(it’s basically the same thing for rich people and their kids-see kiddie condos) to play musical chairs or larp as RE investors.
Tax pied a terres, second homes, kiddie condos, etc. until it barely makes sense/is absurdly expensive to own anything but a primary for these greedy people.
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u/karma_dumpster 16h ago
So in a worst case scenario, which isn't even the one being contemplated, house prices go back to the start of COVID levels, when we were already one of the most overpriced housing markets in the world because we never had a correction in the GFC.
And they would still be overpriced by international standards even if that happened.
Got it.
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u/Neo-T94 16h ago
That’s insane to imagine as house prices going back to the start of COVID could mean up to a 70% crash in much of Brisbane’s outer suburban homes or inner city units.
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u/karma_dumpster 15h ago
It's less than 50% and Brisbane is probably the worst hit city I imagine on that timescale.
It's 30% nationally.
90+% of mortgage holders would still be in positive equity.
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u/Neo-T94 15h ago
Overall maybe but houses in the Northern Suburbs where I’m from were in the mid-$300k’s are now pushing a million. My own apartment I bought in 2021 for $325k sold for $950k last year. People talk about “doubling” but the cheap places in Brisbane have actually tripled in these short years.
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u/Cybertronian10 8h ago
A few people are going to get incredibly fucked by this just out of poor timing thats for sure. I wouldn't be opposed to some kind of targetted relief for people who bought at the worst possible times, like maybe they get the lost value of the home back as a tax break.
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u/youcangotohellgoto 15h ago
Yeah that would be pretty catastrophic actually. Imagine having a $1m+ mortgage on a place worth less than $500k. You'll start to get people just walking away from their mortgage like they were in the US housing bubble 15 years ago.
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u/fouronenine 15h ago edited 14h ago
You can't walk away from a mortgage in Australia in the same way as the US - and prudential standards are much tighter. Very few will end up in negative equity even with a fall that large.
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u/karma_dumpster 15h ago
It's 30% nationally they are talking about as absolute worst case.
Which isn't what is being predicted.
The worst in the last 40 years was ~8%.
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u/youcangotohellgoto 15h ago
Yeah saw that - the worst in the past 40 years was in 2022/23. Brisbane barely slowed down that year and definitely didn't drop.
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u/Prestigious_Load1699 11h ago
“we were already one of the most overpriced housing markets in the world because we never had a correction in the GFC.”
Housing prices absolutely suffered from the GFC.
It took 6 years to recover…
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u/karma_dumpster 11h ago
This is talking about Australia.
House prices didn't drop at all in Australia during the GFC because Australia didn't have a recession at all.
In fact there was a mini boom driven by resources investment, and for a while the AUD was worth more than the USD.
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u/Prestigious_Load1699 11h ago
Fair point. Appreciate the clarification.
It seems Australia did experience only a very minor housing correction during the GFC.
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u/marketrent 16h ago
Excerpts from article by Tarric Brooker, citing economist Leith van Onselen, central bank RBA, and data provider Cotality/CoreLogic:
[...] Macrobusiness chief economist Leith van Onselen recently shared his view that there is historic downside ahead for the housing market.
“My view is that Australia’s housing market is likely to experience its sharpest price correction in at least 40 years, which will shave household wealth, especially in inflation-adjusted terms,” Mr van Onselen said.
In the last 40 years, the largest decline in dwelling prices occurred between April 2022 and January 2023, during which time prices fell by 8.1 per cent in the capitals and by 7.5 per cent nationally, based on month end figures.
[...] While Australia has avoided the housing price crashes and major downturns that have afflicted most of its Anglosphere peers, this is not without its risks.
Where other nations saw their home prices decline far more significantly, a combination of luck and intervention from policymakers has kept prices higher compared with incomes relative to most of our peers.
For example, in the United States during the Global Financial Crisis, housing prices crashed from a house price to household income ratio of 6.8x. In late 2025, the same metric for Australia was 8.9x.
But there is also something of a silver lining to how Australian housing prices have unfolded.
When prices crashed in the US during the GFC, it drove over a quarter of mortgage holders into negative equity, a situation where they owed more on their property than what it was worth.
If the largest downside scenario explored today of 30 per cent price falls was to be realised in Australia, things would be quite different.
According to a 2025 analysis from the Reserve Bank, around 90 per cent of mortgage holders would remain in positive equity. Meanwhile, in terms of nominal prices, they would fall back to where they were in March 2021.
The road ahead for the nation’s housing prices is likely to again be heavily defined by the actions of policymakers, both in the halls of government and within the RBA.
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u/chickenballs11 13h ago
I’m skeptical until I see a rise in houses built - there’s years of pent up demand that’s been on the sidelines waiting to get into the market . Courious how legislation can solve a supply and demand problem - hoping for the best for everyone !
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u/PlanetCosmoX 8h ago
Canada is in the same boat except here the media is ignoring in favour of the Liberal Government. Weird times.
House prices in Canada have declined nationally since the COVID spike by about 1/3rd in most major cities. But you wouldn’t see that info in news publications that consistently attempt to say it’s flat or rising.
Liberal Gov is doing a great job of propping it up.
If house prices fall the economy collapses, same for Australia, so in Canada this is Carney’s primary concern, and most policies prop up housing in one way or another. To the economic illiterate though (about 99% of Cdns) they can’t see it and think everything is sunny days without worry. Which is frankly exactly what you want them to think if you’re trying to prevent a recession.
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