Will Falling Property Prices Really Make Housing More Affordable?
Estimated reading time: 3 minutes
Property prices may fall, but does that necessarily mean Australian housing will become more affordable?
Evidence presented to the Senate Select Committee on Intergenerational Housing Inequity suggests the answer is more complicated. The inquiry is examining housing affordability, home ownership, housing supply and the factors contributing to housing inequality between generations. [aph.gov.au]
Q: Won’t falling property prices improve affordability?
A: To some extent, yes, but falling prices alone may not solve the problem.
Dr Sally Auld, NAB Chief Economist, told the Senate inquiry that NAB forecasts a peak-to-trough decline of around 7% across Australia’s combined capital cities. However, she cautioned that this would not solve Australia’s housing affordability problems. [nab.com.au]
According to Dr Auld, meaningful improvements in affordability will require a sustained increase in housing supply over a long period, with the challenge likely to take“the better part of a generation to resolve.” [nab.com.au]
Q: Why is housing supply so important?
A: Because affordability is about more than the price of an individual property.
In her evidence, Dr Auld described housing affordability as fundamentally a supply-side issue. She pointed to the roles played by planning systems, infrastructure provision, taxation policy, regulation and housing delivery. [nab.com.au]
Put simply, softer property prices may offer some relief to buyers, but Australia still needs sufficient housing to meet demand.
Q: Is Australia approving enough new homes?
A: Recent figures show that housing approvals can fluctuate considerably.
According to the Australian Bureau of Statistics, seasonally adjusted dwelling approvals fell 3.6% in July 2026 to 17,687. Private-sector house approvals fell 4.2% to 10,199, while private-sector dwellings excluding houses fell 0.4% to 7,119. [abs.gov.au], [abs.gov.au]
The results also varied between states. Total dwelling approvals fell 8.1% in New South Wales and 13.9% in Queensland, while Victoria recorded an increase of 9.7%. [indexbox.io]
Importantly, an approved dwelling is not yet a completed home. Therefore, increasing approvals is only one part of increasing the actual supply of homes.
Q: Is housing supply the only reason for poor affordability?
A: No. Broader economic and financial factors also play a role.
Dr Luci Ellis, Westpac Chief Economist and former Reserve Bank assistant governor, told the inquiry that the shift to lower inflation and financial deregulation had contributed over time to higher house prices relative to household incomes. [abc.net.au]
This reinforces an important point: housing affordability is more complex than whether property prices are simply rising or falling.
Q: What does this mean for buyers?
A: Lower property prices may provide some welcome relief, but the purchase price is only one part of the affordability equation.
Buyers also need to consider their household income, borrowing capacity and the availability of suitable properties.
A softer market may therefore create opportunities for some purchasers without necessarily resolving Australia’s broader affordability problem.
Q: What does this mean for sellers and property investors?
A: It reinforces the importance of looking beyond national property price headlines.
Property markets can behave differently from one suburb to another. For owners and investors, local supply and demand conditions remain important considerations when assessing their property and the surrounding market.
For landlords, the number of homes actually available to tenants is particularly important. An approved development cannot add to rental supply until the dwelling is ultimately completed and made available to the market.
Q: So, what is the bottom line?
A: Falling property prices may help some buyers, but they are unlikely to resolve Australia’s wider housing affordability challenge on their own.
The key message from Dr Auld to the Senate inquiry was that meaningful improvements in affordability require a sustained increase in housing supply over a long period. [nab.com.au]
Rather than asking only:
“Are property prices going up or down?”
Perhaps the more important long-term question is:
“Are we delivering enough homes to meet Australia’s housing needs?”
In Summary
Australia’s housing affordability challenge is about much more than property prices.
The key points are:
- Falling property prices may provide some relief, but they will not necessarily make housing affordable for everyone.
- Housing supply remains a major challenge, with NAB identifying affordability fundamentally as a supply-side issue. [nab.com.au]
- Australian Bureau of Statistics figures show total dwelling approvals fell 3.6% to 17,687 in July 2026 on a seasonally adjusted basis. [abs.gov.au]
- Increasing housing supply is not simply about approving more developments. Ultimately, homes need to be delivered and become available to buyers and tenants.
- For buyers, sellers, landlords and investors, it remains important to consider local supply, demand and broader market conditions, rather than relying solely on national property price movements.
The takeaway: Property prices may rise and fall through different market cycles, but Australia's longer-term affordability challenge remains closely connected to providing enough housing to meet demand.
This article is provided for general information only and does not constitute financial, investment or property advice.