Property prices: WA and Queensland worst performers in homes shortage yet interest rates and tax still crucial

Queensland and WA have been hit hardest by housing shortages since 2021 in new research that also reinforces warnings the national property market is headed for a slowdown.

Judo Bank chief economic advisor Warren Hogan and senior economist Matt De Pasquale on Monday estimated Queensland had a 2 per cent deficit in home-building over the past five years. WA fared even worse with a shortage of more than 4 per cent.

That means population growth was faster than new housing supply.

The news was promising in most other parts of the country amid a Federal Government target to built 1.2 million new dwellings from 2024 to 2029.

New South Wales was broadly in balance while Tasmania and Victoria posted surpluses.

Yet Judo also warned the biggest factor driving Aussie property prices has been movements in interest rates following three consecutive hikes by the Reserve Bank this year. That reversed three cuts last year.

“A worsening shortage is not what drove the national price surge through 2025,” the analysis said.

“Most States’ shortages actually stabilised or narrowed over the past two years.

“The common force lifting prices everywhere was lower rates and funding costs, and increased investor momentum.”

But a lack of housing supply was still a key factor for WA and Queensland as these States “are exactly where prices have run hottest” the report said.

Judo Bank’s assessment is a fresh blow for property lobbyist claims widely made earlier this year that real estate prices will be largely unaffected by rising interest rates and the Federal Budget’s changes to capital gains concessions and negative gearing.

Auctions have slowed and volumes are down 8 per cent compared to the same time in 2025. About half of those auctions were successful.

HSBC’s Paul Bloxham recently predicted property prices would drop between 2 and 6 per cent next year while Moody’s Ratings last week tipped a slowdown in housing thanks to the rate hikes and tax reforms.

“The tax reforms will slow property transaction volumes and constrain national house price growth at a time when rising interest rates and broader global economic uncertainty linked to the Middle East conflict are already weighing on consumer confidence,” the firm’s analysis said.

“National dwelling price growth was already moderating before the tax changes were announced. Sydney and Melbourne values were down 3.5 per cent and 3.6 per cent, respectively, year to date to June 2026.”