NAB predicts 10 per cent fall in property prices as Labor accused of ‘crashing wealth’

Labor has been accused of “crashing” wealth, with one big four bank now predicting double-digit property price falls this year in Australia’s biggest city.

National Australia Bank has dramatically updated its forecasts to have Sydney property values plunging by 10 per cent in 2026 as Melbourne values fell by 9 per cent, with dwelling values in those biggest cities 5 per cent below recent peaks reached earlier this year.

Just last month, NAB was predicting a 6 per cent fall in Sydney, and a 7 per cent decline in Melbourne.

Capital city house prices overall are now expected to fall by 5 per cent this year, which is worse than NAB’s July forecast of a 2 per cent decline for 2026, following the Reserve Bank’s three interest rate rises so far this year, and Labor’s May Budget taxes on investment properties.

“Revisions continue to show starker price declines than initially reported,” NAB’s housing monitor report for August released on Tuesday said.

“Recent data had left the risk skewed firmly to the downside of our earlier house price forecasts.”

Brisbane’s growth was expected to slow to just 2 per cent, down from an earlier forecast of 9 per cent.

Perth, Australia’s strongest housing market, was tipped to see its growth pace slow to 5 per cent, down from 14 per cent as Adelaide’s growth slowed to just 1 per cent from a previous forecast of 7 per cent.

Capital city property prices are now only expected to grow by 1 per cent next year, half the 2 per cent growth pace predicted in July, with median house and unit prices now slightly above $1 million.

“We have revised down our dwelling price forecasts off the back of slightly softer than expected outcomes for Sydney and Melbourne over recent months and a much sharper than expected slowing in Perth, Brisbane and Adelaide, where we had previously expected a slowing in growth rather than outright declines,” NAB said.

KPMG has also released new forecasts, expecting Sydney house prices would slump by 4.4 per cent in 2026 as Melbourne values declined by 5 per cent, with fewer investors forecast to put money into property.

The Coalition estimates 61,091 first homebuyers who entered the market between December last and March this year, when the property market peaked, would be in negative equity where they owed the bank more than their home was worth.

Shadow treasurer Tim Wilson has accused Prime Minister Anthony Albanese’s Labor Government of celebrating the fall in house prices, with PropTrack data showing $230 billion had been wiped from property values in just four months.

“It’s clear that the Albanese government doesn’t understand that they’re deliberately crashing Australians’ wealth,” he said.

“The Albanese Government needs to stop high-fiving falling house prices, because they’re sending first homebuyers and Australian families into negative equity.”

But Acting Prime Minister Richard Marles is insisting house prices will continue to grow despite new forecasts of sharp falls this year in Australia’s biggest cities.

“There’s a lot of factors which go into people’s interest in purchasing houses, and interest rate rises are one of them, but I think what we’ll see over the longer term is growth in housing, but it’ll be sustainable growth,” he told Sydney radio station 2GB on Tuesday.

Mr Marles emphasised Labor’s policies were focused on “getting more first home buyers into homes”.

“You can still invest in property if you’re investing in new houses and get the tax break that existed under negative gearing, and that’s about trying to promote more homes being built,” he said.

KPMG is expecting Sydney, Australia’s most expensive property market, to suffer a 4.4 per cent drop in house prices this year as apartment values remained flat.

This would occur as Melbourne house values dropped by 5 per cent as unit values increased by 0.4 per cent.

Canberra house prices were expected to fall by 2.6 per cent this year as apartment values increased by 1 per cent.

“Weak market sentiment can often outlast underlying fundamentals, which increases the risk of a sharper and more extended downturn,” KPMG economists Brendan Rynne and Brian Tran said.

“Moreover, ongoing economic uncertainty and a higher-for-longer interest rate environment may further weigh on buyer and investor confidence, delaying the recovery.”

Nonetheless, house and unit prices were still expected to rise this year in Brisbane, Adelaide, Perth, Hobart and Darwin.

While curbs on negative gearing are tempering demand for investment properties, existing investors would be unlikely to flood the market.

“Nationally, transaction volumes are likely to moderate as recent tax changes encourage existing investors to hold on to their properties as negative gearing benefits are grandfathered,” KPMG said.

Values were still expected to improve in 2027 as the RBA cut rates again and a housing shortage persisted.

“KPMG expects the housing market to follow a V-shaped path over the next two years, with a correction in 2026 followed by a gradual recovery in 2027,” it said.

“We expect a recovery in dwelling prices as fundamental supply shortages reassert themselves.

“Affordability constraints are expected to prevent a return to the rapid price growth experienced in recent years in other booming cities.”

Sydney and Melbourne house prices have been falling since February, when the Reserve Bank began the first of three interest rate hikes, followed by increases in March and May that undid last year’s relief and took the cash rate to 4.35 per cent, Cotality data showed.

Values declined in Brisbane and Adelaide in June and July after Labor’s May Budget restricted negative gearing tax breaks to brand new homes from July next year and replaced the 50 per cent capital gains tax discount with a new 30 per cent tax.

“The correction reflects a combination of interest rate hikes in February, March and May, uncertainty around the Middle East conflict and housing‑related tax policy changes announced in the Federal budget in May,” Westpac’s head of macro-economic forecasting Matthew Hassan said.

Separate data from PropTrack showed a 0.4 per cent fall across the capital city markets in July with declines in Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart and Canberra with Darwin the only market to see gains.

Regional markets were flat, with falls in NSW and Victoria but an increase in South Australia.

The Reserve Bank is broadly expected to leave interest rates on hold on Tuesday next week, but ANZ said a November increase was still a possibly with inflation at 3.8 per cent in June, putting it above the RBA’s 2-3 per cent target for the 11th straight month.

“There remains a small risk of a rate hike in November, although this is not our base case,” economists Sophia Angala and Adam Boyton said.