CommBank Global Economic & Markets Update
Housing Market Outlook: Has the Slowdown Begun?
Why It Matters
Understanding the drivers behind the housing slowdown helps homeowners, investors, and policymakers gauge risk and plan for potential price corrections, especially in major cities where negative equity could emerge. The episode highlights that short‑term sentiment and policy shifts can temporarily depress the market, but longer‑term fundamentals such as supply‑demand balances and upcoming rate cuts will shape the outlook through 2027.
Key Takeaways
- •Price growth flattening; Sydney, Melbourne prices expected to fall
- •Negative gearing, CGT changes cut investor loans, halve by 2026
- •RBA likely cuts rates May and August, easing market pressure
- •Tax incentives boost new builds, but supply constraints remain severe
- •Sentiment slump self‑reinforces; recovery expected early 2025
Pulse Analysis
The latest ComBank View episode highlights a clear deceleration in the Australian housing market. After three rapid RBA rate hikes, price growth has stalled, with national forecasts now flat for 2024 and modest declines of 6‑7 % projected for Sydney and Melbourne. Auction clearance rates and listing activity have softened, reflecting a cautious buyer sentiment amplified by the May budget’s tax reforms. While lower rates traditionally buoy demand, the lingering uncertainty has prompted many prospective owners and investors to pause, creating a self‑reinforcing cycle of reduced transactions.
Budget‑driven changes to negative gearing and the capital gains tax discount directly target investor profitability. ComBank expects investor loan volumes to halve by 2026, driven by diminished after‑tax returns and tighter financing conditions. Although the government retained negative gearing for new dwellings and introduced a $2 billion infrastructure fund, supply‑side bottlenecks—rising construction costs, labour shortages, and planning red tape—limit new‑home deliveries. Consequently, mid‑size capitals such as Perth and Brisbane continue to post strong price momentum, while oversupply in Sydney and Melbourne suppresses growth.
Looking ahead, the forecast hinges on the RBA’s anticipated 25‑basis‑point cuts in May and August 2024. Should rate reductions materialise, price growth could rebound to around 3 % by 2027, with the market bottom expected in early 2025. Conversely, a prolonged high‑rate environment would compress growth to near‑zero and extend the correction. Stakeholders are advised to monitor policy signals, construction pipeline health, and rental yield dynamics, as these factors will shape affordability and investment returns in the post‑slowdown landscape.
Episode Description
Australia's housing market has remained remarkably resilient, but is the slowdown only just beginning?
Host Mandy Drury speaks with CommBank Senior Economist Trent Saunders about the latest trends in the housing market and why sentiment is starting to weaken. They discuss softer auction clearance rates, longer selling times and how higher interest rates and recent housing tax reforms are weighing on buyer and investor confidence.
They also explore why CommBank economists now expect house prices to remain broadly flat through 2026, what the changes to negative gearing and capital gains tax could mean for affordability and investment, and what could help stabilise the market as interest rates eventually begin to ease.
Plus, CommBank’s Associate Economist Lucinda Jerogin shares the key focuses for markets in the week ahead.
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