In recent weeks, the news surrounding the Australian housing market has gone from bad to worse, with commentary from bank analysts that mortgage demand has fallen significantly, with some observations seeing demand from property investors down as much as 50%.
In a recent appearance on Channel 7’s ‘Sunrise’ Shadow Attorney General Michaelia Cash and Housing Minister Clare O’Neil debated the issue of housing, during which Cash claimed that the Albanese government crashed the housing market.
“You have actually managed to crash the housing market.”
“They (first home buyers) relied on your promises, they stretched themselves, they bought a home, and because of your policies those homes are now worth less than what they bought them for.” Cash said.
We know from the United States and some markets in places like New Zealand in recent times what a housing crash looks like, but given the highly elevated level of Australian housing prices and the swift run up since the pandemic, how far back would different levels of price falls take us?
A recent analysis from Kusher Consulting Director and former REA Executive Manager of Economic Research, Cameron Kusher tells us just that.
In terms of dwellings at a national level vs when prices were last at that level.
10% fall from peak – January 2025
20% fall from peak – April 2023
30% fall from peak – February 2021
Source: Cameron Kusher
To put this into perspective, according to data from Cotality, the largest price fall in a real estate cycle over the last 40 years was between 2017 and 2019, when prices fell by a little over 8% at a capital city level.
The Takeaway
While the issue of housing prices is an increasingly controversial one, the reality is if prices were to fall by a level akin to those of Canada or New Zealand at a national level, it would only take home prices back to roughly where they were in 2023.
While there is an increasingly large amount of commentary that falling housing prices will crash the economy, the reality is that even markets that have experienced what many analysts would call a crash have only endured what would be considered very mild recessions and that has arguably been a result of broader economic issues in nation’s such as Canada or New Zealand.
Ultimately, it’s certainly true that fully kicking the reliance on a high housing price led economy would lead to some challenging adjustments.
However, it is arguably equally true that the addiction to housing is going to be hard to overcome and take place over a long period, if it ever happens at all.
