While Demand Has Weakened, Australia's Underlying Housing Issues Are Stronger Than

One of Australia's top economists has declared the end of a 30-year property super-cycle that made local homes among the world's priciest, even as rivals warn prices will bounce back on chronic undersupply. AMP chief economist Shane Oliver said Monday that higher interest rates, record-poor affordability, slower immigration and federal budget changes to property taxation may have finally halted a run that pushed values far above fair worth. Data from Cotality showed capital city values fell 0.9 per cent last month, the weakest since Labor took office in 2022, with Sydney down 1.7 per cent and Melbourne off 1.4 per cent.

Every major capital is now slowing or negative, though national values have only retreated to March levels and median house prices in Sydney, Brisbane, Perth, Adelaide and Canberra still top $1 million. Oliver argued the super-cycle, fuelled by falling official rates since the early 1990s, had probably ended, predicting prices will tread water for a decade rather than surge. "If the property super-cycle upswing is over, it could mean a decade or so of real house prices ranging sideways and a moderation in home price-to-income ratios, he said.

He expects a 7 per cent easing through next year, leaving Sydney values 41 per cent above long-run levels, Brisbane 65 per cent higher and Melbourne 25 per cent above trend. But he conceded the housing shortage could lift prices, a view shared by KPMG chief economist Brendan Rynne, who will forecast a 1.1 per cent national drop this year before a 3.4 per cent rebound in 2027. KPMG sees Sydney falling 4.4 per cent then rising 3.6 per cent, Melbourne dropping 5 per cent before a 3.3 per cent gain, while Brisbane and Perth climb 3.6 per cent next year after rises of 4.6 and 6.4 per cent this year. Rynne blamed higher rates, affordability pressures and weaker investor activity for the slide, but said a housing dearth would drive a "V-shaped" recovery.

"While demand has weakened, Australia's underlying housing issues are stronger than ever, he said. Deputy Liberal leader Jane Hume called the drop a deliberate government outcome, saying budget measures created "uncertainty" for buyers and investors. Treasurer Jim Chalmers noted the decline matched seven similar falls over the past two decades, including 2022 and 2017-2019.