June Housing Market Wrap-Up: Is Australia’s Housing Market Now in Decline? Questions and Answers
What is happening to Australia’s housing market?
According to the latest housing market data, Australian home prices recorded their largest monthly decline in more than three years. National dwelling values fell by 0.4% in June, while Sydney led the downturn with a 1.2% fall, bringing its median home price to approximately $1.27 million.
Property research firm Cotality reported that the housing market is now showing signs of a broad-based decline rather than isolated weakness in a few locations.
Why are house prices falling?
Several factors appear to be contributing to the slowdown:
- Higher interest rates have reduced borrowing capacity.
- Housing affordability remains stretched for many buyers.
- Changes to capital gains tax (CGT) and negative gearing have weakened investor confidence.
- Overall buyer sentiment has become more cautious.
Housing researcher Tim Lawless said demand had already been slowing because of interest rate rises and affordability pressures, with recent tax changes further discouraging some investors from entering the market.
How have investors reacted?
Industry feedback suggests many investors have pulled back from purchasing property.
Through our open homes and discussions with prospective buyers, we have noticed a difference in market sentiment, with many purchasers taking more time before making a decision
A key reason appears to be low consumer confidence, with many potential buyers remaining cautious about entering the market.
What does the Federal Government say?
Prime Minister Anthony Albanese acknowledged that home prices may still increase over time, but at a slower pace than they would have without the recent policy changes.
The government argues that reducing investor advantages creates a more level playing field for first-home buyers. The goal is to help more Australians move from renting into home ownership by reducing competition from investors who benefit from tax concessions.
Housing Minister Clare O’Neil stated that Treasury expects the policy reforms to slow house price growth by around 2%, while prices are still expected to rise gradually over the long term.
How much have prices fallen so far?
Sydney home values are currently about 3.6% below their recent peak.
While this decline is notable, it remains smaller than the housing downturn experienced in 2022, when rapid interest rate increases caused Sydney prices to fall around 8.5% at a similar stage of the cycle.
Experts say the current downturn is broadly tracking in line with previous housing market cycles.
Which cities are being affected?
Housing market performance varies across Australia:
- Sydney: down 1.2% in June
- Melbourne: down 1.0%
- Adelaide: no growth, remaining flat
- Brisbane: up 0.3%
- Perth: up 0.7%
While the larger eastern capitals have weakened, some smaller capital cities continue to record modest growth.
Could first-home buyers benefit?
Potentially, yes.
If investor demand continues to soften, first-home buyers may face less competition at auctions and when purchasing homes. This could improve access to home ownership for many Australians who have previously struggled to enter the market.
The government believes these conditions will help tens of thousands of first-home buyers secure a property sooner.
Is there a risk for recent buyers?
There is some risk, particularly for first-home buyers who purchased with a 5% deposit under the government's home guarantee scheme.
If property prices fall further, some buyers could experience negative equity, where the home is worth less than the remaining mortgage balance.
However, experts believe the risk of widespread problems is limited because:
- Borrowers are assessed using strict lending criteria.
- Banks apply a 3% serviceability buffer, meaning borrowers must demonstrate they can afford repayments even if interest rates rise further.
- Australia’s employment market remains relatively strong.
Negative equity generally only becomes a serious issue if homeowners are forced to sell during a market downturn.
Is this the end of Australia's housing boom?
It is still too early to know.
Experts agree that the recent changes are likely to reduce overall housing demand and ease upward pressure on prices. However, there is no clear consensus on whether this marks the end of Australia's long-running housing growth cycle or simply represents another normal market correction.
For now, the market appears to be entering a period of softer prices, lower investor activity, and increased opportunities for first-home buyers.
References
- Original article: "Housing market ‘fully in decline’ as prices tank".
- Cotality (formerly CoreLogic Australia) Housing Market Research and Monthly Home Value Reports.
- Statements by:
- Gerard Burg, Head of Research, Cotality
- Tim Lawless, Research Director, Cotality
- Prime Minister Anthony Albanese
- Housing Minister Clare O’Neil
- ABC News Breakfast interviews and parliamentary statements quoted in the article.