Australia’s property market is entering a period of increasing uncertainty, with housing values falling for six consecutive months and declines spreading across most capital cities.

In this episode of The CEO Breakdown, John Saade examines whether Australia’s housing downturn could become significantly deeper, including the increasingly discussed possibility of a 20% peak-to-trough decline.

National dwelling values fell another 1.1% in September, while 97% of capital city suburbs recorded declines over the September quarter. Sydney is now 8.6% below its February peak, while Brisbane, Melbourne, Adelaide and Perth are also experiencing significant falls.

With the Reserve Bank of Australia (RBA) lifting the cash rate to 4.60%, mortgage stress increasing and sales volumes falling, the question is no longer simply whether property prices are declining. The bigger question is: how far could the downturn go?

Australian House Prices Have Fallen for Six Consecutive Months

The latest housing data shows that the downturn is becoming increasingly broad-based.

National dwelling values declined by 1.1% in September, marking the sixth consecutive month of falls. The decline is no longer concentrated in one or two major markets either.

During the September quarter:

• 97% of capital city suburbs recorded falling values.
• Sydney values fell 4.9% over the quarter.
• Brisbane values fell 4.7%.
• Perth values fell 4.7%.
• Melbourne values fell 3.4%.
• Sydney is now 8.6% below its February peak.
• Melbourne is around 7.2% below its cyclical high.

The speed of the decline is particularly important. Some markets have moved significantly lower in a relatively short period, raising questions about whether the current correction could eventually become one of Australia’s more substantial property downturns.

Could Australian House Prices Fall 20%?

A 20% decline is not a certainty, but the possibility is receiving more attention as forecasts are revised.

Westpac, for example, has doubled its forecast for national home values to fall 6% over the year, compared with its previous 3% prediction. Its forecast also places Sydney’s expected decline at around 10%.

Other forecasts have moved towards larger peak-to-trough falls, with AMP’s Shane Oliver revising his outlook to a 10%–15% decline.

The important point is not that every forecast is predicting a 20% crash. Rather, forecasts are becoming progressively more negative as new housing and economic data arrives.

A 20% decline would represent a much larger correction than current national figures. Whether Australia reaches that level will depend on several factors, including interest rates, unemployment, household finances, forced sales, buyer demand and the broader economy.

Why the 20% Forecast Is Being Discussed

There are several reasons analysts are considering a deeper downturn:

• Property values are already falling rapidly in some markets.
• Interest rates have increased again.
• Mortgage stress is affecting millions of households.
• Sales volumes have declined significantly.
• Buyer borrowing capacity remains constrained.
• Consumer confidence is weak.
• Economic conditions could deteriorate further if unemployment rises.
• Higher mortgage repayments may result in more properties being listed for sale.

This does not mean a 20% fall is inevitable. It means the risks surrounding the property market have increased.

Why 4.6% Interest Rates Can Still Create Serious Mortgage Pain

It can be misleading to compare today’s interest rates directly with the 17% rates experienced in Australia around 1990.

The size of the mortgage relative to household income is fundamentally different.

Australian property prices have risen substantially over several decades, meaning many households now carry much larger debts. Consequently, a significantly lower interest rate can still result in a very large repayment burden.

For example, analysis discussed in the episode suggests that mortgage repayments as a proportion of wages are now comparable to, or higher than, the levels experienced during the 1990 interest-rate peak in several capital cities.

The issue is therefore not simply “What is the interest rate?”

It is also:

• How large is the mortgage?
• How much has the property cost relative to income?
• How much disposable income remains after repayments?
• Can the household absorb another rate increase?
• What happens if employment or business income falls?

These factors are particularly important for highly leveraged property owners.

Mortgage Stress Could Put Further Pressure on Property Prices

More than two million Australian households are reportedly experiencing mortgage stress, highlighting the financial pressure facing borrowers.

When households struggle with repayments, they generally have several options:

1. Reduce discretionary spending.
2. Refinance or restructure their mortgage.
3. Extend their loan term.
4. Use savings or other assets.
5. Sell the property if the financial pressure becomes unsustainable.

The final option can create additional supply in a market where buyer demand is already weak.

Could Forced Sales Accelerate the Housing Downturn?

Forced or distressed sales do not automatically cause a property crash. However, if the number of sellers increases while buyers become increasingly cautious, sellers may need to accept lower prices to complete transactions.

That can create a cycle:

Higher repayments → mortgage stress → more properties listed → weaker buyer demand → longer selling periods → lower prices.

This is one reason mortgage stress is an important indicator to watch as the current correction develops.

Falling Property Transactions Also Affect Australian Businesses

The housing downturn is not only a problem for homeowners and investors.

Property transactions support a wide range of businesses and professionals, including:

• Mortgage brokers
• Real estate agents
• Auctioneers
• Conveyancers
• Removalists
• Trades and contractors
• Property managers
• Building and renovation businesses
• Finance and professional services

When fewer properties are bought and sold, these businesses can experience lower revenue and reduced activity.

State governments can also be affected because weaker property transactions can reduce stamp duty revenue.

For business owners operating in property-related industries, this makes cash-flow planning particularly important during a downturn.

What Should Property Owners and Investors Do?

Nobody can reliably predict the exact bottom of the Australian property market.

Instead of making decisions based solely on headlines about a 20% crash, property owners and investors should understand their own financial position.

Consider reviewing:

• Current mortgage repayments and interest rates
• Loan-to-value ratios
• Available cash reserves
• Rental income and property expenses
• Business cash flow
• Tax obligations
• Refinancing options
• Potential changes to household or business income

For business owners, the same principle applies: cash flow becomes even more important when economic conditions are uncertain.

A property downturn can affect your personal wealth, business activity, borrowing capacity and investment decisions simultaneously.

Is a 20% Property Decline Inevitable?

No.

A 20% peak-to-trough decline remains a scenario rather than a guaranteed outcome.

The housing market could stabilise if inflation falls, interest rates eventually ease, buyer confidence returns and economic conditions remain resilient. On the other hand, further rate increases, rising unemployment, worsening mortgage stress or increased distressed selling could create additional downward pressure.

The key takeaway is that Australia’s housing correction is already significant, and the speed of the decline deserves attention.

For property owners and business owners, the most important question may not be “Will prices fall 20%?”

It may be:

“Can my finances withstand a prolonged period of falling property values and higher borrowing costs?”

That is where proactive financial planning can make a meaningful difference.

Frequently Asked Questions About Falling Australian House Prices

Are Australian house prices falling?

Yes. Australian dwelling values have recorded six consecutive months of declines, with weakness spreading across most capital city markets.

Could Australian house prices fall 20%?

A 20% decline is possible but not certain. Several analysts have increased their forecasts for the current downturn, but forecasts vary considerably.

Why are Australian property prices falling?

Higher interest rates, reduced borrowing capacity, affordability pressures, higher living costs, weaker consumer confidence and reduced buyer demand are among the factors putting pressure on property prices.

Is mortgage stress getting worse in Australia?

Mortgage stress is a significant concern, with more than two million households reportedly struggling with home loan repayments. Further interest-rate increases could add to this pressure.

What should property owners do during a housing downturn?

Property owners should assess their debt, cash flow, loan structure, reserves and overall financial position rather than making decisions based solely on market forecasts.

Talk to Latitude Accountants

If falling property prices, higher interest rates or changing economic conditions are affecting your personal or business financial decisions, professional advice can help you understand your options.

Latitude Accountants provides practical accounting, tax and business advisory services for Australian individuals and business owners.

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Disclaimer

This article provides general information and commentary only and does not constitute financial, tax, property, investment or legal advice. Property markets and economic conditions can change, and individual circumstances vary. Speak with a qualified adviser about your own circumstances before making financial or investment decisions.