Five rate rises are a big enough shock for any housing market. Add a federal budget that touched capital gains tax, negative gearing, self-managed super fund borrowing and trust arrangements, and you get something rarer: buyers and sellers who both decide to wait. Three industry analysts now expect Australian house prices to find a floor, but their timing and their view on who leads the recovery do not match.
Three forecasts, three start dates
The forecasts sit within a few months of each other, which tells you most of them are reading the same fog.
- Late this year or beyond. One economist says the slump may run until at least the end of this year. Stabilisation starts once the peak in interest rates is visible.
- Early next year. A property researcher expects a revival then, on two conditions: rates steady, and Canberra stays quiet on policy for several months.
- Around mid next year. A research head at a large agency wants rate cuts to look likely and petrol and other living costs to ease first.
Notice what each one needs. None of them says prices recover on their own. Each is waiting for a trigger outside the housing market.
Separating the policy effect from the rate effect
This is the claim worth testing: that repeated changes to tax and lending settings are delaying the floor, beyond what higher rates alone would do.
The researcher offers one useful clue. Activity has dropped across every buyer type, including first-home purchasers, not only investors. Many of those buyers are not directly touched by the budget changes. That points to a general loss of confidence and the squeeze on borrowing capacity, not a narrow tax reaction.
So the honest read is mixed. Rate rises and high living costs explain the weak demand from borrowers. Policy uncertainty plausibly explains why even people who are unaffected are holding back, because nobody wants to buy into rules that might shift again.
Here’s the catch: the published commentary offers no clean way to split the two. You would need price, credit and approvals data compared before and after the budget, and the figures we have here do not include them.
What would a proper test look like?
If policy uncertainty is the main brake, you would expect to see a few things.
- Investor lending falling faster than owner-occupier lending after the budget, not just in line with it.
- Weakness spreading to buyer groups the changes do not touch, which is what the researcher describes.
- A rebound in activity once rates steady and policy goes quiet, even if rates stay high.
If instead owner-occupier lending tracks the rate path almost one for one, the rate effect is doing most of the work. Our guide to RBA interest rates and repayments sets out how those rate moves flow into household budgets.
Where the recovery lands is a live argument
The analysts split on geography, and the split matters for investors.
One view is that cheaper cities and regions are already strongest and should stay that way. Hobart, Darwin and regional Tasmania are named, along with undersupplied regional areas that appeal to yield-seeking investors.
The economist argues the opposite sequence. Affordable segments recover last, because investors have pulled back from them. Places such as Ipswich, suburban Perth and affordable Sydney areas posted strong annual growth, then weakened after the budget.
Both can be partly right. Strong past growth and recent weakness can sit in the same market if the buyer mix changed. The risk is assuming last year’s winners keep leading when their main buyers, investors, are the group most affected by the policy changes.
The in-the-room view: a gentle recovery, not a boom
All three analysts describe a drawn-out, modest recovery rather than a rebound. That fits the constraints. Borrowing capacity is still squeezed, living costs are high, and none of the forecasters expects rate relief to be fast.
If you are deciding anything this year, a rule of thumb helps: treat the timing forecasts as conditions, not dates. Each says prices stabilise if rates steady, if policy stays still, if costs ease. Check which of those conditions is actually showing up before you act on the date.
Two things would shift this picture. A rate path that surprises either way would reset every timeline above. A new round of policy announcements would reset the clock the researcher is counting down, since his forecast depends on months of quiet.
Bottom line
The forecast is a gentle floor sometime between late this year and mid next year. The reasons it keeps slipping are rates, costs and a policy environment that people no longer trust to stay put. The next useful step is to watch investor lending against owner-occupier lending in the next credit releases, because that gap is the best available test of how much of this is policy and how much is rates. For a related read on how lenders are passing rate moves through, see mortgage rate pass-through and who can undercut the majors.
Key numbers
- Five rate rises have squeezed borrowing capacity
- Three analysts, three timelines: late this year, early next year, mid next year
- Activity has fallen across every buyer type, including first-home buyers
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General info, not financial advice.
