EDITORIAL: PM’s housing long game ignores current crisis
EDITORIAL: Home buyers are focused on their finances stretching over the short game, pay packet to pay packet.
Another day, more gloom about the housing market.
New forecasts from AMP and modelling by the Reserve Bank of Australia have intensified fears about the direction of prices and impact on borrowers.
They came on top of statistics from Cotality which showed a fall in capital city home prices since March of 6.4 per cent.
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By continuing you agree to our Terms and Privacy Policy.On Tuesday the RBA hit home loan borrowers again by taking the cash rate to a 15-year high of 4.6 per cent.
It was the fourth rate rise this year and on Wednesday, data showed inflation had soared to a three-month high of 4 per cent in August — up from 3.5 per cent in July — putting it above the RBA’s 2-3 per cent target for the 13th straight month and sparking fears of even more rates pain on Melbourne Cup day.
And a combination of rising interest rates and the Albanese Government’s property taxation changes has seen expectations grow of further house price plunges.
AMP chief economist Shane Oliver is forecasting a 10 to 15 per cent drop in Australian home values by late 2027.
“Rate hikes are usually associated with falling property prices or slower price growth,” he said. “This is because they cut how much buyers can borrow, can boost distressed sales and hit home buyer confidence.
“The drip feed of higher rates will also put more pressure on existing homeowners already suffering from mortgage stress which when combined with rising levels of unemployment risks a rise in distressed home sales and defaults.”
In an indication that a 15 per cent slump in prices is already seen as possible, the RBA’s latest financial stability review modelled the prospect of a 20 per cent plunge.
It found such a fall could push 5 per cent of mortgages into negative equity — where borrowers owe their bank more than their home is worth.
Recent buyers who took out low-deposit mortgages, including first home buyers who used the Government’s 5 per cent deposit scheme, are seen as especially vulnerable.
But Prime Minister Anthony Albanese and Treasurer Jim Chalmers have continued to brush aside concerns.
Dr Chalmers argued house values were back to late 2025 levels, and that rate hikes were playing a bigger role than the Albanese Government’s contentious Budget broken-promises housing tax changes.
Mr Albanese also defended the changes. “We want young Australians to own their own home,” he said. “To have the same opportunity that previous generations have had.
“That’s why we put in place the changes.”
Those changes were sold under the slogan of “intergenerational equity”. But as most of the recent first-home buyers — seen as vulnerable — are likely to be young people, the slogan rings hollow.
Mr Albanese said also that “when you invest in your home it’s an investment over the long term”.
But playing the long game might be the furthest thing from those buyers’ minds right now.
They are focused on their finances stretching far enough to play the short game.
They are working out how to keep their heads above water, pay packet to pay packet.
