SYDNEY: A steep drop in Australian home prices, fuelled by the federal government’s move to curb tax breaks for investors, has prompted analysts to question whether one of the world’s most spectacular property booms could finally be ending.
Over the past 30 years, prices in Sydney, Australia’s most populous city, have surged by more than 730 per cent, with the median price rising from A$215,000 – or less than six times the median income – to about A$1.8 million (S$1.6 million) – more than 13 times the median income. The nationwide housing boom, fuelled by high migration, falling interest rates and a shortage of housing supply, has created one of the world’s most expensive property markets.
But a downturn is under way.
Property prices in Sydney and Melbourne, the country’s two largest housing markets, have fallen by 4.5 per cent since the start of 2026, including declines of at least 1 per cent in the past month, according to Cotality, a property research firm. Auction clearance rates – the proportion of auctioned properties that sell – have fallen to their lowest levels since the early days of the Covid-19 pandemic in 2020.
The chief economist at financial services firm AMP, Shane Oliver, told The Straits Times that he believes there is a "significant" chance that Australia’s long-term boom could be over.
He said the factors that had driven the boom since the mid-1990s had shifted from "tailwinds to headwinds". For instance, the move towards two-income households has "probably run its course", the benefits of financial deregulation that made securing loans easier have been fully realised, and the gradual trend of falling interest rates has ended, with no expectation of a prolonged series of further rate cuts.
"We have been in a long-term boom which took prices from below trend to above trend and price-income ratios to levels never seen before," he said. - ST/ANN
