Aussie households warned $1.3 trillion wipeout looms?

(Cameron Micallef’s article from NEWS.COM AUSTRALIA on 08 September 2026.)

Property price fall ‘tip of the iceberg’ as Aussie households warned $1.3 trillion wipeout looms: Australian homeowners are officially $34.1bn poorer – and economists say that staggering loss barely scratches the surface of what’s coming.

Households are officially $34.1bn poorer, but experts warn the worst is yet to come as property prices are tipped to fall for the next 12-months. Australian Bureau of Statistics latest values of dwellings shows homeowners have officially lost $34.1bn as the housing market decline begins. The total value of Australian residential property is now $12.7 trillion.

AMP chief economist Shane Oliver told NewsWire this is just the tip of the iceberg, with up to a trillion dollars expected to come off the market. “There’ll be a lot more to come, the downtrend is only just starting,” he said. “Even allowing for data that has already been reported there is more downside to show up in the current quarter and of course the current quarter has seen an acceleration in price falls.”

Mr Oliver said falling house prices will continue well into next year, with 15-18 month decline, although it varied depending on the property market. “The downswing in property values will probably continue out until the June quarter next year, so we probably have at least another six months of falling prices,” he said.

AMP is currently forecasting house prices are likely to fall by more than 10 per cent from peak to trough. This would be in line with other forecasts, including Commonwealth Bank forecasts this week predicted home values would continue to fall by 9 per cent nationally, while NAB predicted falls of around 7 per cent.

The capital cities including Sydney and Melbourne are predicted to fall by more than 10 per cent under all three assumptions. Mr Oliver forecasts about $1.3 trillion will come off the property market by the midpoint of next year, if his 10 per cent forecast comes true.

Currently, REA Group figures show the housing market has now entered its fifth straight month of decline, down 0.2 per cent in August. National house prices have now dropped 2.7 per cent from peak to trough since March, although they are still up 1.8 per cent over the last year.

Mr Oliver said house prices will continue to fall based on higher interest rates, changing tax policy making it less attractive to invest in property, while poor confidence will also hit the market. He then expects house prices to rebound, due the Reserve Bank cutting interest rates by mid next year.

Risks of a recession rise

The Australian economy is getting closer to a recession as falling house prices put a halt to consumers spending. Australian Bureau of Statistics GDP figures released on Wednesday show the economy grew by 0.4 per cent over the June quarter or 2.1 per cent over the last year.

The figure came in “slightly better” than market expectations of 0.3 per cent, but was still relatively weak. And the year-on-year growth of 2.1 per cent is considered “disappointing”, although Treasurer Jim Chalmers described the economy as “robust” in responding to the data.

Mr Oliver warns the Australian economy could slow further due falling house prices and the economic phenomenon known as the wealth effect. The wealth effect is a theory that people spend money when they feel richer due to their assets rising, even if their day-to-day cash flow hasn’t changed.

In the same way falling asset prices means households tend to save more money, as they feel worse about their situation. Mr Oliver says the wealth effect from a 10 per cent fall would take about 1 per cent off consumer spending over 6-months and over the year it would take off 1.5 per cent.

“(Falling house prices) will be a dampener on growth going forward. While it is not necessarily enough to knock us into a recession it risks that. If you knock off 1.5 per cent off consumer spending that is nearly a one per cent hit to economic growth compared to what it would be. Most economists already expect the economy to slow to 1.5 per cent, but the risk is it could slow down more.”

Mr Oliver says the slowdown is already underway saying annual growth could come in somewhere between 0.5 to 1 per cent at the low point which is expected to be June next year.

Rate hikes are working

During her comments made at the AFR property summit RBA chief economist and assistant governor Sarah Hunter said three interest rate hikes have put downward pressures on property prices.

“Those three rate hikes at the start of the year, we understand and we know cyclically that will put some downward pressure on house prices and will slow things down a bit in the housing sector more broadly,” Ms Hunter said.

“That is part of what we’re trying to achieve through transmission. We’re trying to cool things off a bit, if you like, to bring inflationary pressures back down.” She pointed out that while higher rates have slowed inflation so far, there may be further interest rate hikes needed to get rid of persistent inflation.

“I think the board has been pretty clear, and the staff as well. I’m certainly pretty clear that inflation is top priority right now – inflation is above target, and has been for some time.”