Why a 7% Fall in Australian Home Prices Won’t Solve the Affordability Crisis

The National Australia Bank (NAB) is forecasting that dwelling prices across the country’s capital cities will fall about 7% from their peak, roughly a 5% drop in the 2026 calendar year.

Sally Auld, NAB’s chief economist, warned that even this decline will not solve Australia’s housing‑affordability issues. She noted that house prices have risen much faster than household incomes since around the turn of the century, driven by low interest rates, favourable tax settings and strong demand.

Westpac chief economist Luci Ellis added that lower inflation and financial deregulation introduced in the 1990s have been multi‑decade contributors to the widening gap between house prices and incomes. The lower inflation environment allowed lower nominal interest rates, enabling larger mortgages relative to earnings.

Supply constraints further deepen the problem. Australia has seen a massive shrinkage in public housing, a persistent mismatch between housing approvals and actual completions, and a sharp rise in building costs – all of which limit the flow of new homes into the market.

Because the shortage of supply is unlikely to be resolved quickly, meaningful improvements in affordability will require a sustained increase in housing construction over many years, not just a short‑term price correction.

COPYRIGHT DISCLAIMERS

4English does not own the rights to this content. All rights belong to the owner. 4English only uses this content to help users learn English via the app's features. Contact to request the removal of your content: contact@4englishapp.com.

Практика аудирования