{"id":775038,"date":"2026-07-02T20:55:13","date_gmt":"2026-07-02T20:55:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/775038\/"},"modified":"2026-07-02T20:55:13","modified_gmt":"2026-07-02T20:55:13","slug":"what-a-fall-in-house-prices-would-mean-for-australians","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/775038\/","title":{"rendered":"What a fall in house prices would mean for Australians"},"content":{"rendered":"

After decades of growth Australian house prices are slowing. Here’s what a fall could look like.<\/p>\n

Property prices are under more scrutiny than ever before.<\/p>\n

Following a shake-up<\/a> to negative gearing and the capital gains tax (CGT) discounts, the housing market has stalled and auction clearance rates are down<\/a>.<\/p>\n

There’s some consternation among investors and home owners about a decrease in property values \u2014 and their concerns are backed by the big banks.<\/p>\n

NAB has predicted a 2 per cent drop<\/a> across major capital cities, while Commonwealth Bank has revised their growth estimate to 3 per cent<\/a>, down from 5 per cent.<\/p>\n

Prices are already sliding, with a reported 1.2 per cent decrease<\/a> in Sydney last month alone.<\/p>\n

Investment bank Morgan Stanley has predicted house prices could fall between 5 and 10 per cent, which it described as “one of the largest price corrections over the past 40 years”.<\/p>\n

So, what would a 10 per cent fall in house prices mean for Australians?<\/p>\n

\"A<\/p>\n

First, we need to look at how house prices have boomed over the decades.<\/p>\n

This chart, using data from the Australian Bureau of Statistics<\/a>, captures average dwelling prices in Australia dating back to 1999.<\/p>\n

Average house prices have increased by more than 400 per cent since 2000, rising about 8 per cent per year.<\/p>\n

It’s obvious prices have gone up, but let’s zoom in to better understand the market’s journey to this point.<\/p>\n

\"A<\/p>\n

We’ll start in 1999, when then-prime minister John Howard introduced the Capital Gains Tax (CGT) discount.<\/p>\n

The 50 per cent discount allowed taxpayers to reduce their taxable capital gain by half rather than adjusting for inflation.<\/p>\n

We’ll note here that in 2000 the average cost of a house in Australia was between $205,000 and $215,000.<\/p>\n

In early 2001, with house prices gradually ticking up, the Howard government doubled the First Home Owner Scheme from $7,000 to $14,000 until the end of the year.<\/p>\n

The market continued to rise steadily throughout the mid-2000s, where house prices were averaging between $364,000 and $391,000.<\/p>\n

We’re going to zoom our chart out a little bit more here.<\/p>\n

Because in the mid-2000s, the market changed in a big way.<\/p>\n

\"A<\/p>\n

In 2008, the global financial crisis (GFC) hit.<\/p>\n

In a bid to prevent an economic recession, one of the measures the Rudd government enacted during this period included tripling the First Home Owner Boost to $21,000 to stimulate the residential construction market.<\/p>\n

Unsurprisingly, the GFC is where we see our first sizeable dip in the market in our chart.<\/p>\n

By the time 2010 rolls around, the market was on the up and the average cost of a house surpassed half a million dollars.<\/p>\n

Australia’s housing market boomed during this time thanks to a cocktail of negative gearing, high population growth from migration, low interest rates and tight housing supply conditions.<\/p>\n

\"A<\/p>\n

Across the next 10 years, the Reserve Bank of Australia (RBA) gradually reduced the cash rate target from 4.75 per cent in late 2010 to just 0.25 in March 2020.<\/p>\n

By early 2020, house prices were averaging between $694,700 and $738,900.<\/p>\n

Let’s zoom out again, because things are about to change in a big way.<\/p>\n

\"A<\/p>\n

When COVID-19 hit, the pandemic dramatically reshaped Australia’s housing market.<\/p>\n

Several factors, including record-low interest rates and economic stimulus, helped property prices surge.<\/p>\n

It’s worth noting here, too, that property prices skyrocketed during the pandemic when immigration was at a historic low.<\/p>\n

The Morrison government introduced the HomeBuilder scheme \u2014 a limited-time $25,000 grant to build a new home or substantially renovate an existing home.<\/p>\n

By late 2024, the average price of a house in Australia surpassed the $1 million mark.<\/p>\n

In October 2025, the Albanese government expanded the 5 per cent deposit scheme, which led to a jump in first home buyers entering the market.<\/p>\n

We’ve now caught up to 2026, where the federal budget revealed the 50 per cent CGT discount would be replaced with a discount based on inflation.<\/p>\n

So if Australia were to see a 10 per cent drop in house prices, what would that look like?<\/p>\n

\"A<\/p>\n

It means prices would only return to where they were in late 2024.<\/p>\n

Economist James Graham from the University of Sydney says property prices are still expensive, even with a drop in value.<\/p>\n

“House prices have been growing rapidly year on year for at least four or five years,” Dr Graham says.<\/p>\n

“10 per cent sounds large and it is for some people, but it’s not that large in the grand scheme of ongoing house price growth that we’ve seen.”<\/p>\n

Independent economist Nicki Hutley says Australia is “one of the least affordable places in the world” when it comes to house prices in terms of price to income ratio.<\/p>\n

The median house price is now 8.9 times the average income, according to Cotality<\/a>.<\/p>\n

“The idea behind the tax changes is to make fewer investors compete with particularly first home buyers so that the house prices will come down and make them more affordable.”<\/p>\n

To get a sense of those who will be impacted most by the changes, we spoke to a prospective buyer, a new home owner, and someone hoping to sell.<\/p>\n

First up is our prospective buyer: Zakariah Northcott.<\/p>\n

Mr Northcott lives in Brisbane, one of the fastest growing housing markets in the country.<\/p>\n

He describes a fall in prices as a “market correction”.<\/p>\n

The 25-year-old works as a customer service manager and says at times he has felt hopeless saving for a home deposit with his partner.<\/p>\n

Over the last six years, house prices have more than doubled in Brisbane.<\/p>\n

“It feels like the game’s rigged against us,” he says.<\/p>\n

\"A Zakariah Northcott and his partner Zoe Mildwaters are looking to buy their first home.(Supplied)<\/p>\n

“Houses need to fall for it to be a reasonable thing for anyone to buy a house.<\/p>\n

“If house prices continue to go up at the rate they are, it doesn’t matter if we save till we’re 45, we’ll never have a big enough deposit.”<\/p>\n

Mr Northcott says at present all he can afford is a one-bedroom apartment.<\/p>\n

“We need more than one bedroom so that we can have a family, have space,” he says.<\/p>\n

“If house prices don’t fall, that might mean that we just flat out don’t get to have kids.<\/p>\n

“It’s our life goal. We’ve always wanted a family, a home, the same thing that our parents and grandparents had.”<\/p>\n

On the other side of the country, in Perth, we have our new home owner \u2014 Daniel Jones.<\/p>\n

Mr Jones says “distorted” house prices need to fall even if his home may end up being worth less.<\/p>\n

The 27-year-old bought his two-bedroom apartment with his wife last September for about $725,000.<\/p>\n

\"A Daniel Jones says “distorted” house prices need to change.(Supplied)<\/p>\n

The property was smaller than the couple would have liked as new parents but decided to enter the market to stay close to family in Perth’s inner western suburbs.<\/p>\n

He says the increase in prices over the last two decades is unsustainable and locking younger people out of home ownership.<\/p>\n

“It’s becoming an investment casino rather than what it should be, which is a place for people to live,” he says.<\/p>\n

Ms Hutley says for most who have bought over the last few years, a fall in house prices by even 5 per cent would leave the value of their home the same from when they bought it.<\/p>\n

Since the COVID-19 pandemic house prices in Australia have increased by more than 50 per cent.<\/p>\n

Ms Hutley says negative equity, which is when a home is worth less than what is owed to the bank, is an increased risk with house prices falling.<\/p>\n

“There is a risk young new home buyers who’ve got higher levels of debt, if they lose their job and they have to sell and the house price is worth less, then that’s a big problem,” she says.<\/p>\n

“Not so much for the banks because they have mortgage lenders insurance, but for a person to walk away with less than they started is problematic.<\/p>\n

“We’re talking about a very small percentage of the population there, but nevertheless, for those who have faced that risk, it is concerning.”<\/p>\n

\"A Daniel Jones bought his two-bedroom apartment with his wife last September.\u00a0(Supplied)<\/p>\n

Mr Jones says he’s not afraid of the risks of falling house prices for new buyers such as negative equity.<\/p>\n

He says his property has already increased in value by at least 10 per cent.<\/p>\n

“It’s not nice for people who end up with negative equity. But in order to reverse that discount, unfortunately some people have to lose out,” he says.<\/p>\n

“I have very strong views on this. I think that it’s long overdue.”<\/p>\n

Then there are those who are looking to sell. Larissa Ferguson was hoping house prices would not fall after she spent the last three years building her three-bedroom home in Victoria Point, in Brisbane’s south-east.<\/p>\n

The single mother of three says she planned to sell her home in the next year to buy a bigger house for her family, but those plans are now on the backburner.<\/p>\n

Ms Ferguson says the total cost of her home was about $830,000.<\/p>\n

“With housing prices possibly going down, I might not be able to get what I had hoped for which will impact me getting something big enough for us,” she says.<\/p>\n

\"Larissa Larissa Ferguson says falling house prices and higher interest rates has elevated her fears of negative equity.(Supplied)<\/p>\n

Dr Graham says falling house prices impact the entire market, not just the home a person is trying to sell.<\/p>\n

“If all houses are falling by 10 per cent, your house falls by 10 per cent, but so does the house that you want to buy.<\/p>\n

“So for that person, there’s not really any worse off than they were a month or two ago.<\/p>\n

“People sometimes forget that. They feel like they’ve lost wealth, but as long as what you want to do with the wealth is just buy another home, it’s kind of a wash.”<\/p>\n

But Ms Ferguson says the combination of falling house prices and higher interest rates has elevated her fears of negative equity.<\/p>\n

She already spends about half her income on her fortnightly mortgage repayments.<\/p>\n

“If [house prices] do drop, then the money that I’d sort of made on my last property over the last 10 years will be unfortunately for nothing,” she says.<\/p>\n

“That will have serious consequences for me financially and the kids if it does drop below what I’ve put in for it.”<\/p>\n

Ms Hutley says to be cautious on house price predictions because they can be tricky to get right.<\/p>\n

She says there are a lot of factors at play for the market to be contracting right now.<\/p>\n

“Rising interest rates, the changes to tax treatment of investment properties, the stretching of valuations of the house price to what people earn,” she says.<\/p>\n

“All of those factors are putting downward pressure on house prices.”<\/p>\n

The prime minister has acknowledged the consternation among investors and home owners, but says the changes are about “making the system fairer”.<\/p>\n

“Everyone has acknowledged during this debate that the housing system is broken,” Anthony Albanese told 7.30 on Monday night<\/a>.<\/p>\n

“Therefore we had to do something about it.”<\/p>\n

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