Key takeaways
Mainstream media headlines about a “property crash” are exaggerated and aimed at attracting attention. While the CoreLogic Home Value Index showed a slight national decline (-0.1% in December 2024), house prices were up 4.9% nationally for the year, with double-digit growth in some markets like Brisbane, Adelaide, and Perth.
Historically, property value declines are smaller and shorter than growth periods. Sellers tend to withhold properties during price dips, limiting supply and stabilising prices. Factors like high unemployment or a recession, which could trigger a crash, are not currently present.
The Australian property market is not crashing; it’s undergoing a cyclical adjustment. By understanding market fragmentation and taking a long-term perspective, investors and homebuyers can position themselves for success.
If you’ve been tuning into mainstream media, you’ve likely seen headlines proclaiming doom and gloom for Australia’s property market, that property values are falling everywhere, and the so-called “national property boom” is over.
In my mind, this is just sensationalist clickbait media coverage of the recent CoreLogic Home Value Index, which ended the year on a negative note, with values down -0.1% nationally over the month, the first monthly decline in the national index in almost 2 years.
However, if you look at the following table from CoreLogic, you will see that the figures show something quite different, with house prices up by 4.9% nationally in 2024 and continuing to rise in many markets around Australia.
In fact, Brisbane, Adelaide, Perth, and a few regional locations enjoyed double-digit growth over the last year.
While this was substantial capital growth, it’s far from a “boom”, and while prices did fall, in particular in Sydney and Melbourne, this is far from a crash.
While the recent growth phase of the market has been cooling in the second half of 2024, I believe any cyclical downswing in early 2025 is unlikely to be large, with buyer and seller confidence returning when interest rates fall later this year.
Just look back at all the forecasts of property value falls a few years ago and how wrong they were.
At a national level, home value declines tend to be shorter and smaller than periods of increases.
What usually happens is that sellers withhold their property from sale until values start rising again, effectively restricting available supply during periods of price falls.
And we’re not likely to see a rise in forced sales this year as most mortgaged households appear to be coping with current interest rate settings.
Then, as the year progresses, growth in real incomes should support more buyer demand as inflation moderates, and a reduction in interest rates boosts borrowing capacity.
Underlying these economic factors is also a fundamental shortage of homes relative to the population, and the squeeze on the delivery of new housing amid weak capacity in the construction sector.
In fact, the current conditions present unique opportunities for savvy investors and homebuyers.
Let’s look at this in more detail to see why I don’t think the market is on the verge of collapse and how you can use the current market to your advantage.
The media’s narrative is overblown
Headlines often focus on the negatives—higher interest rates, sluggish auction clearance rates, and modest price corrections in some areas.
Of course, it’s not the media’s job to educate you – they just want you to click on the headlines and visit the pages where their advertisers have paid for exposure.
The Sydney and Melbourne property markets are frequently used as a barometer for the nation’s housing health, and while they may appear to be “languishing” on the surface, this view is overly simplistic.
These cities are not singular markets but highly fragmented ones, with performance varying dramatically by:
- Geographic location: Many suburbs with strong amenities, infrastructure, or lifestyle appeal are still performing well.
- Price points: The luxury end of the market has been underperforming lately, but this market segment is always more volatile.
- Property type: More buyers are trading backyards for balconies and courtyards as houses have become more unaffordable.
The generalisations pushed by media commentary fail to capture these nuances, leading to distorted perceptions of the overall market.
The fragmented nature of Australia’s markets
It’s not just Sydney and Melbourne that are misunderstood.
There is no single “Australian property market” but instead a collection of diverse micro-markets.
Across Australia, property markets are fragmented, with some states, specific suburbs and certain regional cities defying national trends.
The good news is that those who understand this can outperform the averages.
A window of opportunity for investors and homebuyers
In times of uncertainty, many prospective buyers sit on the sidelines, waiting for “better” conditions.
However, history shows that periods of market lull often represent the best opportunities for investors and homebuyers to act.
Here’s why:
- Reduced competition: With some buyers hesitant to enter the market, there’s less competition for quality properties. This can lead to better deals for those who take a long term view.
- Long-term upside: Buying during quieter periods positions you to benefit when the market inevitably recovers.
- Focusing on fundamentals: By targeting properties in high-demand or gentrifying locations with strong economic drivers, you can secure assets that will outperform the market over time.
As I see it, while Sydney and Melbourne are experiencing mixed performance, this lull presents a golden opportunity to secure assets in top-performing suburbs or to buy quality properties that are undervalued due to temporary market conditions.
Why the market won’t crash
Several key factors underpin the resilience of Australia’s property market:
- Housing shortages: Supply remains critically low, with new housing construction failing to keep pace with population growth. This is especially true in cities absorbing high immigration levels like Melbourne, Sydney and Brisbane. And the cost of delivering new dwellings has risen considerably meaning there is significant intrinsic value in many established properties.
- Stable lending practices: Australia’s strict lending regulations mean most homeowners are financially resilient, reducing the risk of forced sales.
- Interest rate will eventually fall: The current stable rate environment and the prospect of falling interest rates will restore buyer confidence.
- Long-term demand: Australia’s population is growing rapidly, fuelled by immigration. This creates ongoing demand for housing in key markets, particularly in urban and regional hubs.
Simply put, the structural factors that drive property prices—supply shortages, population growth, and stable economic conditions—remain in place.
And the factors that could lead to a crash, such as high unemployment levels, rising interest rates or a recession are not on the cards.
The property market isn’t crashing—it’s adjusting
While media commentators focus on short-term challenges, they fail to recognise the market’s inherent resilience and the opportunities that come with a lull.
Whether you’re an investor or a homebuyer, understanding the fragmented nature of the market and acting strategically can help you outperform the averages and build long-term wealth.
Remember, in property, fortune favours those who take a long-term view and don’t make their 30-year investment plans based on the last 30 minutes of news.
