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🇦🇺 Australia /Economy & Trade

How a minor or major housing downturn could impact your city

From ABC Australia · () English

Summarized and contextualized by DistantNews.

At a glance

Analysis Named sources Context piece
  • New analysis suggests that even a significant housing downturn would not erase the gains made in Australian mid-sized markets over the past five years.
  • Melbourne has a smaller buffer against price falls compared to cities like Perth, Brisbane, and Adelaide, which saw exceptional growth.
  • Economists predict property prices could fall further this year and in 2027, influenced by interest rates, tax policies, and global uncertainty, with auction clearance rates indicating market weakness.

Even a substantial housing market downturn in Australia would likely leave many mid-sized cities with a net gain after five years of booming property values, according to new analysis. Property data firm Cotality modeled four scenarios of market pullbacks, ranging from 5% to 20% declines.

A decline beyond 10 per cent in Melbourne would return values to pre-pandemic levels.

— Gerard BurgCotality head of research Gerard Burg commented on Melbourne's housing market vulnerability.

The modeling highlights that cities like Perth, Brisbane, and Adelaide, which have experienced exceptional growth over the last five years, possess a more significant buffer against potential price drops. For instance, even a 20% fall in Perth's market from its peak would still leave median dwelling values around where they were in April 2025. Melbourne, however, has a relatively thinner buffer, with values potentially returning to pre-pandemic levels if prices decline by more than 10%.

Even if Perth's housing market fell 20 per cent from its peak, the median dwelling value would still be around where it was in April 2025 after recording one of the strongest growth cycles of any capital city.

— Gerard BurgGerard Burg highlighted the resilience of Perth's housing market due to strong past growth.

Broader economic forecasts align with a softening market. ANZ economists predict property prices could fall by 4.3% this year and 3.4% in 2027. They attribute this trend to restrictive interest rates, recent tax policy changes, and global uncertainty dampening market sentiment. A key indicator of this weakness is the auction clearance rate, which has fallen below 50% in major markets like Sydney and Melbourne, a level historically correlated with price declines.

Since our last forecast update in June, the housing market has softened a little more than we were expecting.

— Madeline Dunk and Adam BoytonANZ economists Madeline Dunk and Adam Boyton noted the market's unexpected softening.

While some experts believe a double-digit property downturn is unlikely without a major economic event akin to the Global Financial Crisis, others see a 5% drop as more realistic given moderating inflation. The current market conditions are seen by some as temporary, largely driven by high interest rates and government tax policies. However, a continued downward trajectory in inflation could prompt a shift in the market.

It is clear the combination of restrictive interest rates, recent tax policy changes and global uncertainty have dampened sentiment in the market.

— Madeline Dunk and Adam BoytonThe ANZ economists identified key factors dampening market sentiment.
DistantNews Editorial

Originally published by ABC Australia. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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