The housing market in Australia is facing a grim reality as house prices are falling across major cities, sparking concerns among economists and commentators. The latest data from Cotality reveals a dramatic deceleration in price growth, with Sydney, Melbourne, Adelaide, and Brisbane/Gold Coast experiencing price declines over the past 30 days. This trend has led to a chorus of warnings about a challenging road ahead for the housing market.
Leith van Onselen, chief economist at Macrobusiness, predicts a historic downturn, suggesting that Australia's housing market is likely to experience its sharpest price correction in at least 40 years. The largest decline in dwelling prices during this period occurred between April 2022 and January 2023, with prices falling by 8.1% in the capitals and 7.5% nationally. The question arises: what if this time, Australia's luck runs out, and housing prices undergo a significant decline, mirroring other Anglosphere nations?
The article explores this scenario, using Cotality data to project price outcomes. If dwelling prices fall by 8%, nationally, prices would drop to $868,500, a level last seen in April 2025. For capital cities, the median dwelling price would fall to $954,800, and for regions, to $709,600, last seen in September 2025. These projections highlight the potential impact on household wealth and the housing market's overall health.
Despite Australia's housing market being one of the most expensive globally and its households being among the most indebted relative to incomes and GDP, the country has historically avoided housing downturns and crashes. However, the article raises the concern that this time might be different. If prices fall by 10, 20, or 30%, the implications could be significant.
The analysis also compares Australia's housing market to the United States during the Global Financial Crisis. While the US experienced a sharp decline in housing prices, driving over a quarter of mortgage holders into negative equity, Australia's situation is more favorable. According to a 2025 Reserve Bank analysis, around 90% of mortgage holders would remain in positive equity, even with a 30% price fall. Nominal prices would revert to March 2021 levels.
The road ahead for Australia's housing prices is heavily influenced by policymakers' actions, including the government and the RBA. Historically, they have intervened to support the market, but inflation and changing circumstances may make this choice more complex and costly this time. The article concludes by emphasizing the importance of these decisions and the potential impact on the nation's housing market and economy.
