When Will Australian House Prices Crash? Forecast 2025–2027

The Australian property market has been called everything from “rock solid” to “a bubble waiting to burst”. With affordability stretched, mortgage stress rising, and mixed signals from the economy, many people are asking: when will Australian house prices crash?

This guide takes a deep, evidence-based look at the question. We’ll cover what a “crash” really means, the current state of the market, the risk factors that could cause prices to fall, and forecasts for 2025–2027. We’ll also break it down city by city and explain what it means for buyers, sellers and investors.

Understanding What “Crash” Means in the Property Market

When people say “the housing market will crash”, it sounds dramatic, like prices will suddenly collapse and thousands of homeowners will lose everything. But in real estate, a “crash” has a more specific meaning, and it’s important to separate it from other, less severe market changes.

Think of it like the difference between:

• Tapping the brakes (a slowdown),
• A small bump in the road (a correction), and
• A full-on car accident (a crash).

Here’s how they differ:

1. A Slowdown

A slowdown is when prices stop rising quickly, or even level out. Imagine houses were going up 10% a year, then suddenly they only go up 1–2%, or not at all. You might not notice much unless you were expecting big growth. This happens often after a boom and usually isn’t harmful.

2. A Correction

A correction is when prices dip around 5–10% across a city or region. For example, if a home was worth $1,000,000 and it fell to $920,000, that’s an 8% correction. It can sting if you just bought at the peak, but it usually balances the market by making housing more affordable for buyers. Corrections are fairly common.

3. A Crash

A crash is much more serious. It means prices falling 15–30% or more in a short time across the country or in major cities. That same $1,000,000 home could suddenly be worth $750,000.
Crashes often come with:

• High unemployment (people losing jobs and unable to pay mortgages).
• More forced sales (owners having to sell quickly, often below value).
• Falling consumer confidence (buyers hold back, waiting for lower prices).

Historical Crashes in Australia

• Early 1990s recession: Some capital cities saw double-digit declines as unemployment surged above 10%
• Global Financial Crisis (2008–09): Prices dipped briefly but avoided a full-scale collapse, cushioned by strong demand and government stimulus.
• COVID-19 pandemic (2020): Forecasts warned of a 30% crash, but ultra-low interest rates and stimulus triggered the opposite, a boom.

Australian housing has been remarkably resilient, but corrections do happen.

Current State of the Australian Housing Market (2025)

A crash generally needs weak demand and abundant supply. The latest ABS releases show the opposite mix, supply is constrained, while demand is still supported by jobs and population.

Supply: Approvals and Completions remain tight

• Building approvals fell 8.2% m/m in July 2025 to 15,769 dwellings (seasonally adjusted). Apartment approvals dropped 22.3%, while private houses rose 1.1%. The value of total residential building also edged down 1.6% in the month (ABS).
• Dwellings commenced rose 11.7% in the March 2025 quarter to 47,645 (seasonally adjusted). That’s a welcome lift, but completions remain hampered by builder capacity and cost pressures (ABS).

New supply is still not keeping pace with underlying demand, especially in medium- and high-density stock where approvals are volatile. That limits the chance of an oversupply-driven crash in the near term.

July Key Figures for Building Approvals, Australia

Source: Australian Bureau of Statistics

Source: Australian Bureau of Statistics

Demand: The housing stock keeps gaining value

The total value of residential dwellings rose by $213.8b in the June quarter 2025 to $11.56 trillion. The mean dwelling price lifted to $1,016,700, with the dwelling count at 11.37 million. Values rose in all states, strongest in Queensland and Western Australia (both +2.7% for the quarter).

Valuation momentum remains positive at the national level, which does not look like a market preparing to crash.

Total value of dwelling stock, Australia

Source: Australian Bureau of Statistics

Labour market: Still supportive of housing

Unemployment sat at 4.2% in July 2025 (seasonally adjusted). Participation is around 67%, with hours worked high, signals of a resilient labour market.

Why this matters: housing downturns become crashes when job losses cause forced selling. At 4–4.5% unemployment, that pressure is limited.

Structural backdrop from the Census

Source: Australian Bureau of Statistics

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Forecast Scenarios & Timing: When Could a Crash Happen?

When people ask “when will house prices crash?”, the honest answer is that no one can give an exact date. What economists do instead is create scenarios with different “what if” stories about the future. These scenarios are based on what’s happening in the economy, government policy, and the property market itself.

Here are the main ones experts talk about:

1. The Base Case (Most Likely)

This is the scenario most analysts think will happen.

• Prices either stay flat or grow only a little over the next 12–24 months.
• The Reserve Bank of Australia (RBA) is expected to keep slowly cutting interest rates, which makes borrowing cheaper and supports demand.
• Migration remains strong, meaning more people are looking for homes.

 In this case, there is no crash. Instead, the market takes a breather after years of ups and downs.

2. The Downside Scenario (Small Correction)

This is the “what if things go a bit wrong” story.

• If unemployment starts rising, even just moderately, some households may struggle with mortgage repayments.
• If overseas migration slows down, for example, because of new government policies demand could weaken.
• Together, these could cause prices to fall about 5–10% nationally.

This is called a correction, not a crash. For example, if your $800,000 home dropped to $740,000, it would hurt in the short term but wouldn’t bring down the whole housing market.

The Worst-Case Scenario (Crash)

This is the big fear, but it would take several things happening at once.

• Unemployment would need to spike, think above 7–8% nationally, meaning hundreds of thousands of people losing jobs.
• Mortgage arrears (missed repayments) would rise sharply, leading to forced sales.
• A global shock, like a deep recession or financial crisis, could make things worse by damaging confidence.

In this scenario, prices could fall 15–20% or more. For example, a $1 million property could drop to $800,000 or lower. That’s the kind of fall that would qualify as a crash.

Timing: When Could This Happen?

Based on current conditions, most experts agree a major crash is not likely in 2025.

• The economy is still growing, migration is high, and the RBA is moving towards rate cuts.
• However, 2026–2027 could be riskier. By then, if the global economy weakens or unemployment rises sharply in Australia, the chance of a bigger downturn increases.

A crash isn’t something that happens overnight. It usually takes several economic shocks hitting at the same time. For now, the most realistic path is modest growth or a small correction, with a true crash only possible further down the track if the economy stumbles badly.

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What to Watch: Indicators That Suggest a Crash Is Coming

If you want to track whether a crash is becoming more likely, keep an eye on these signals:

• House price indexes: If monthly data from CoreLogic shows consistent falls across major cities, that’s a warning sign.
• Mortgage arrears: Rising defaults mean more forced sales.
• Unemployment: A sudden jump above 7–8% would weaken demand.
• RBA decisions: Rate rises or pauses in expected cuts would reduce affordability.
• Building approvals: If supply suddenly surges while demand slows, prices could come under pressure.

Watching these indicators helps buyers, sellers, and investors make more informed choices.

Implications for Homebuyers, Sellers & Investors

A possible crash affects different groups in different ways.

For Homebuyers

If you’re buying to live in the property long term, short-term price movements matter less. But be careful not to overstretch yourself, especially in expensive suburbs. Buying with a buffer gives peace of mind.

For Sellers

ABS data suggests tight supply is still doing heavy lifting. You can still achieve strong results with pricing discipline and presentation. Compare agents who have buyer databases and local auction experience, those factors matter in a cautious market. Start with our guide  on how to choose a real estate agent. 

For Investors

Investors should balance rental income (yields) with capital growth potential. With growth slowing, yield becomes more important. Diversifying across different cities or property types can reduce risk if one market turns.

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Conclusion

In short, the latest ABS data paints a picture of a housing market that is stretched but not on the verge of collapse. Building approvals remain subdued, meaning supply is unlikely to suddenly surge and tip the market into oversupply. The total value of dwellings continues to climb, showing that demand and buyer confidence are still present. Most importantly, unemployment sits near historic lows, which reduces the risk of widespread mortgage distress and forced sales, the conditions that typically fuel a crash. 

While small corrections are always possible, particularly in high-priced markets like Sydney and Melbourne, a nationwide crash of 15–20% or more appears unlikely in the near term. Instead, the more realistic outlook is a period of flatter growth or modest gains, with risks rising only if unemployment jumps or migration slows sharply. For buyers, sellers and investors, the key is to watch these indicators, plan conservatively, and make decisions based on long-term needs rather than short-term headlines.

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Related Readings

• Understanding Property Clock (Market Cycles Explained)
• Property Clock: Which Property Markets Are Rising, Peaking, or Falling?
• September 2025 Property Clock & Market Analysis
• Sydney Housing: Why Buyers are Cautious Now & What to Do Next
• Sydney Property Market – Prices, Trends, Forecast
• Melbourne Property Market – Prices, Trends, Forecast
• Brisbane Property Market – Prices, Trends, Forecast
• Perth Property Market – Prices, Trends, Forecast
• Adelaide Property Market – Prices, Trends, Forecast
• Hobart Property Market – Prices, Trends, Forecast
• When Is The Best Time To Sell Property?