Shortage Could Restart Growth

Australia’s current property downturn may prove relatively short-lived, with Westpac forecasting the chronic housing shortage will eventually push prices higher again.

Westpac CEO Anthony Miller expects the current correction to bottom at around 7%, before national property prices return to growth, rising approximately 3% in 2027 and 8% in 2028.

Higher interest rates and recent property tax changes have temporarily weakened buyer demand. Westpac has recorded a 26% fall in investor mortgage applications since the Federal Budget, while first-home buyer applications have fallen 30%.

But weaker demand does not solve Australia’s underlying problem: there still aren’t enough homes.

The national target of 1.2 million additional dwellings is already expected to be delivered later than originally planned.

That supply-demand imbalance provides an important longer-term counterweight to today’s softer market. Once borrowing conditions and confidence stabilise, population growth and insufficient construction could again place upward pressure on property values.

The downturn may therefore represent a cycle rather than a structural reversal.