Crash test dummies
It didn't take long for the property crash articles and forecasts to reappear!
If you think about some of the things the market has been through over the past quarter of a a century, the next crash predictions have never been too far away: the tech wreck, 9/11, global financial crisis, peak of the resources construction boom, the high-rise apartment oversupply, the banking Royal Commission, global pandemic, draconian lockdowns (especially the seemingly endless months of lockdown in Victoria), international border closures, fastest interest rate hiking cycle in modern history...and on it goes.
Let's go back to the numbers.
Since the introduction of inflation targeting and the 2 to 3 per cent inflation target in the early 1990s, it would make sense that we should see nominal housing prices falling periodically at the end of each cycle.
And indeed we have seen plenty of cases where investors have lost significant money - mining towns circa 2012, for example, or buying expensive off-the-plan high-rise units around 2016 and 2017, among other instances.
But at the national level, most downturns have been limited to somewhere between a few per cent to 7 per cent, in nominal terms.
If a correction goes on for some time, the real price correction after accounting for inflation might sometimes be around 10 to 20 per cent for some homeowners.
On to today, and with markets pricing a couple more interest rate hikes there are once again predictions of an upcoming calamity.
Pulling in the other direction, we have higher-than-forecast immigration and a chronic shortage of rental housing in Australia - a problem is that only looks set to get worse for the next few years.
Dr. Alex Joiner of IFM Investors showed in the below chart how producer prices for residential houses had already increased by about 46 per cent between 2020 and 2025.
Source: Dr Alex Joiner, IFM Investors
And now suppliers are reporting further price increases of 30 to 40 per cent or more in many cases (think copper, stormwater pipes, bricks, tiles, timber, electrical cables, PVC, plumbing supplies, plaster cement, bathroom accessories, and so on).
Historically construction prices in Australia have never fallen over the past 60 years or so of data - sometimes they've reached a plateau - but since nominal wages always rise, they just never seem to come back down.
What does this mean for a potential housing correction?
The bottom end of the market looks likely to be supported by the rental housing shortage, the 5 per cent deposit scheme for first homebuyers, and the steepling cost of building new housing supply.
We're not seeing much of a change for appetite for housing in Brisbane to date - I imagine people in Perth are saying the same thing - but there could be other parts of the market at risk of a significant price correction.
The obvious candidates would include the more expensive properties, particularly in Sydney and Melbourne, and also some of the small regional cities which have been swamped by investors en masse in recent years, driving prices far above what the local owner-occupier market can bear.
Wealth hits record
The ABS reported the latest finance and wealth figures for Australia today for the December 2025 quarter, which showed household wealth increasing by 2.5 per cent over the quarter or $454 billion to a new high of $18.85 trillion.
Cameron Kusher of Kusher Consulting charted the increase in the value of residential land and dwellings. which showed land values rising 10.8 per cent in calendar year 2025.
The quarterly increase in land values was 4.1 per cent, which was the fastest increase since the June 2022 quarter.
Source: Cameron Kusher - Kusher Consulting
Household gearing ratios are now low, in part thanks to rising asset prices, as well as the increasing use of offset accounts.
Average net worth per household increased from $1.53 million to $1.65 million in 2025.
There was all the usual debate about whether households are struggling individually, though mortgage arrears are currently very low given full employment and all-time low rental vacancy rates.
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