Australian property slump threatens economic growth

By the Editorial Team · Wednesday, September 2, 2026

Australian home prices fell for the fifth straight month in August, with national values dropping 0.9 percent and major cities like Sydney and Melbourne seeing declines over 1 percent amid rising interest rates. This prolonged downturn threatens household wealth and could slow economic growth further, with experts predicting total price drops around 10 percent before a potential market recovery next year.

Australian home prices declined for the fifth consecutive month in August, marking the most prolonged downturn since the onset of the COVID-19 pandemic, with further decreases anticipated amid persistent inflationary pressures driving interest rates higher. Data released by property consultancy Corelogic showed a 0.9 percent drop in national home values for August compared to the previous month’s 1.2 percent fall.

Major cities led the downward trend, with Sydney and Melbourne experiencing monthly price falls of 1.4 percent and 1.1 percent, respectively, placing values approximately 7 percent below their recent peaks. Other capital cities also saw declines, including Brisbane and Perth, which decreased by 1 percent and 0.8 percent, respectively, signaling a cooling off after strong gains earlier this year.

The ongoing slump in housing prices poses risks to household wealth and could dampen consumer spending at a time when Australia’s economy is already showing signs of deceleration. Economic data expected to be released soon points to annual growth slowing to 1.8 percent in the second quarter, down from 2.5 percent in the first. This moderation is largely attributed to the tightening monetary policy stance of the Reserve Bank of Australia (RBA), which has indicated that interest rates may continue to rise to combat inflation.

Shane Oliver, chief economist at AMP, projected the housing market decline is only about 35 percent complete in terms of magnitude and duration, forecasting a total price drop around 10 percent before a potential recovery emerges in the latter half of next year. Oliver noted that while the real estate slowdown will negatively impact economic growth, it is unlikely to prompt the RBA to reverse its rate hikes in the near term, given ongoing inflation concerns.

Supporting data for the second quarter showed net exports and government spending each contributed 0.1 percentage points to gross domestic product (GDP) growth. However, a 0.3 percentage point reduction from business inventories resulted in quarterly GDP expansion remaining subdued at 0.3 percent.

Analysts from UBS echoed the expectation of a roughly 10 percent decline in home prices during this cycle, which would rank among the steepest drops in Australian history. They highlighted the policy challenge facing the central bank in balancing rising interest rates amid high inflation against weakening housing market conditions.

The sector’s outlook remains constrained by recent government tax reforms introduced in May, which have curbed investor appetite and added further pressure to housing demand. Given the housing market’s interconnectedness with ancillary industries such as real estate services, construction, and trades, sustained weakness in property turnover could have broader economic repercussions.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.