Australia’s housing market is experiencing its worst correction in forty years, with house prices falling 5.2 per cent since March 2026. The Albanese government’s removal of tax breaks and capital gains discounts for investors has triggered a sharper decline than anticipated. Some economists predict a peak-to-trough drop of up to 15 per cent by the end of 2027, raising fears of a broader economic crisis.
The Reserve Bank of Australia is expected to raise interest rates again, compounding pressure on prices and increasing the number of distressed sellers. In Sydney, the median house value plunged by more than A$82,000 in the quarter to September, while Domain recorded the steepest quarterly decline since the early 1990s. Morgan Stanley warns that a 12.5 per cent drop would match the country’s worst housing busts since 1982, alongside the depressions of the 1890s and 1930s.
The bank has cut its 2027 GDP growth forecast to 1.1 per cent and predicted unemployment will rise to 5.1 per cent. Analysts warn that falling prices, while desirable for affordability, risk triggering a recession and public backlash as economic conditions deteriorate.
Source: Financial Times Companies · Summarized by HeadlinesBriefing