Australia faces deepest property downturn since pandemic amid rate hike concerns
SCMP · 2 SOURCESabout 1 hour ago2 MIN
Summary
Australian property prices suffered their worst monthly decline since the pandemic in August, with national dwelling values falling for the fifth consecutive month as stubborn inflation keeps the Reserve Bank of Australia (RBA) poised to raise interest rates further. Sydney and Melbourne continued to lead the downturn, pushing home values down approximately 7 percent from their peaks and threatening household wealth just as the economy risks a sharper slowdown. Economists now warn that the market is only about one-third through the expected correction, with a turnaround not anticipated until the second half of next year.
Key Points
- National home prices fell 0.9 percent in August following a 1.2 percent drop in July, marking the fifth consecutive monthly decline
- Sydney's median home value dropped 1.4 percent in August and has declined 7.1 percent since February, the steepest fall among capital cities
- The national median dwelling value now stands at A$912,885 (approximately US$654,415), 3.6 percent below the March record high
- Property data firm Cotality reported home sales tracking 15.5 percent lower than the same period in 2025 and 11.5 percent below the five-year average
- Shane Oliver, chief economist at AMP, forecasts a peak-to-trough price fall of 10 percent and expects only 35 percent of the correction has occurred
- Capital city real estate listings rose 24 percent above 2025 levels and 8 percent above the five-year average, reflecting a sharp drop in demand
- Annual economic growth is expected to ease to 1.8 percent in the second quarter from 2.5 percent in the first quarter
- Housing credit growth has already started to slow, with quarterly GDP growth stuck at a sluggish 0.3 percent
Why It Matters
The sustained housing downturn poses significant risks to consumer spending, which accounts for more than half of Australia's economy, as falling property values erode household wealth and confidence. With the RBA prioritizing inflation control over growth concerns, further rate hikes could deepen the property slump, creating cascading effects across industries ranging from real estate services to construction and tradespeople. The slowdown also raises questions about Australia's economic resilience compared to other developed economies, particularly as global markets monitor the knock-on effects on related sectors and employment.
The sustained housing downturn poses significant risks to consumer spending, which accounts for more than half of Australia's economy, as falling property values erode household wealth and confidence. With the RBA prioritizing inflation control over growth concerns, further rate hikes could deepen the property slump, creating cascading effects across industries ranging from real estate services to construction and tradespeople. The slowdown also raises questions about Australia's economic resilience compared to other developed economies, particularly as global markets monitor the knock-on effects on related sectors and employment.