Is Australia in a Housing Bubble in 2024?

February 22, 2024
is australia in a housing bubble

Key takeaways:

    • The Australian housing market is characterized by high house price-to-income ratio, strong demand and low supply.

    • Experts are divided on the potential of a correction in the market, making it uncertain for homebuyers and investors when making decisions about property investments.

    • Homebuyers and investors should carefully assess their individual circumstances before investing in the Australian housing market due to regional variations as well as warning signs such as increasing interest rates, oversupply of properties or government policy changes.

Australia’s housing market has been a hot topic of debate, with experts divided on the question: is Australia in a housing bubble?

Generally, the consensus is that Australia isn’t in a housing bubble, and that there’s potential for house prices to continue rising alongside income growth.

But as the market continues to evolve, understanding the various factors at play is crucial for both homebuyers and investors.

Let’s dive into the complexities of Australia’s housing market and explore the factors that could determine its future trajectory.

Understanding the Housing Bubble Concept

A housing bubble occurs when property prices rise rapidly and significantly due to speculation, demand, and other factors, only to be followed by a sharp decline in prices.

The development and deflation of a property bubble are influenced by factors such as:

  • Increased demand for property
  • Lack of supply
  • External events like the Global Financial Crisis
  • The Reserve Bank’s interest rate policies

In the context of the Australian property market, a bubble could lead to a decrease in house prices, commonly referred to as a correction, collapse, or crash.

Currently, Australia’s housing market is characterised by high property prices, driven by factors such as population growth, low supply, and strong demand.

But is Australia truly experiencing a housing bubble? To answer this question, we must dive deeper into the current state of the Australian housing market, examining property price trends, demand factors, and supply challenges.

Additionally, looking back at historical housing bubbles in Australia can provide valuable insights into the present situation.

The Current Australian Housing Market: 3 Impacting Factors

is australia in a housing bubble

The International Monetary Fund (IMF) has reported that Australia has the third-highest house price-to-income ratio in the world. Furthermore, house prices in several developed countries are “well above the historical averages”.

Factors contributing to the current state of the Australian housing market include:

  • Population growth
  • Low supply
  • Strong demand
  • Historically low interest rates
  • Consumer confidence
  • Availability of credit
  • Economic growth
  • Favorable supply-demand ratio

However, the Australian housing market also faces challenges. Risks include:

  • Misalignment of housing prices with expected increases in interest rates as central banks normalise monetary policy
  • A potential major housing market correction
  • The potential effects of fixed-rate loan expirations on mortgage rates

To better understand the current state of the Australian housing market and its future prospects, let’s examine property price trends, demand factors, and supply challenges in more detail.

Property Prices Trends

While the Australian housing market experienced rapid growth in 2021 and early 2022, a cooldown began in mid-2022, leading to price declines in many regions. However, 2023 witnessed a rebound and renewed growth, raising questions about a potential bubble.

Current Data:

  • As of February 2024, CoreLogic’s Home Value Index (HVI) shows national dwelling values 8.1% higher compared to September 2023 and 10.4% higher than February 2023.
  • This indicates a stronger-than-anticipated recovery compared to earlier predictions of slower growth or even price falls.

Expert Opinions:

  • Opinions remain divided. Some, like Westpac, foresee moderate growth continuing in 2024, while others like ANZ predict a further slowdown or even price corrections.
  • The Reserve Bank of Australia (RBA) acknowledges the risks but believes a full-blown bubble scenario is unlikely.

Factors to Consider:

  • Interest rate hikes: Rising rates could dampen demand and affordability, impacting prices.
  • Tightening credit conditions: Stricter lending standards could limit borrowing capacity and reduce buyer pool.
  • Supply and demand dynamics: Ongoing housing shortage in some areas could support prices, while new construction might ease pressure.
  • Economic outlook: Continued economic growth might fuel demand, but global and domestic uncertainties could temper it.

A study of the Australian house prices history can offer deeper insights into these trends.

While the rapid price growth observed in the Australian housing market previously has moderated, affordability concerns remain.

The International Monetary Fund (IMF) continues to highlight the high house price-to-income ratio in Australia. However, interpreting this alongside other market indicators paints a more nuanced picture.

Demand Factors

Demand for housing in Australia is driven by factors such as migration, low rental vacancy rates, and government support programs, all contributing to the housing demand.

For instance, the increased demand for housing due to migration has resulted in a housing shortage and higher rents.

Additionally, the rise in population is contesting with local tenants in the rental market, pushing rents up and influencing property prices.

These demand factors contribute to the pressure on property prices, making it essential for homebuyers and investors to carefully consider the current state of the market.

As demand continues to grow, it becomes increasingly important to monitor the Australian housing market and assess the potential impact of these factors on property prices.

Supply Challenges

The Australian housing market is currently facing a number of supply challenges, including a lack of new development projects, construction industry issues, and rising costs. In capital cities, there is a severe shortage of well-located properties, and very few new large development projects are being planned.

Additionally, the construction industry is confronted with labor shortages, materials shortages, inclement weather, and the risk of building firms going bankrupt.

While property listings are indeed lower compared to 2023, recent months have seen an uptick in new listings. This suggests a potential shift towards increased supply.

To accommodate population expansion, it is estimated that at least 190,000-200,000 dwellings need to be completed. The imbalance between supply and demand in the Australian housing market further exacerbates the challenges faced by homebuyers and investors, making it crucial to monitor the market and adapt to the ever-changing landscape.

Historical Context: Australian Housing Bubbles in the Past

Australia has experienced several housing bubbles throughout its history, with varying degrees of severity and impact on the economy. By examining median house prices australia last 50 years, we can see patterns that provide insight into current conditions.

For instance, during the 1890s, Melbourne’s prices dropped by more than 50% in real terms and Sydney’s decreased by 36%. Analyzing these past events can provide valuable insights into the current state of the Australian housing market.

The more significant the real estate boom, the more severe the potential bust. For example, during the Great Depression in Australia, nominal house prices experienced a decrease of more than 25% from peak levels, yet due to considerable deflation at the time, the real price declines were significantly less.

By examining historical housing bubbles, we can better understand the forces at play in the current market and be better prepared for potential future shifts.

It is important to note that although past housing bubbles can provide insights into the current market, each bubble is unique and influenced by a variety of factors.

Therefore, while history can serve as a guide, it is essential to remain vigilant and closely monitor the ever-evolving Australian housing market landscape.

Expert Opinions on the Australian Housing Bubble

is australia in a housing bubble

Expert opinions on the Australian housing bubble and when will Australian house prices crash are divided-Some are predicting a significant price correction, while others maintain that the market will remain resilient and continue to grow, albeit at a slower pace.

Bubble Concerns:

Moderate Growth Proponents:

  • Westpac Bank: Expects continued, albeit slower, price growth in 2024 fueled by low unemployment and population growth.
  • SQM Research: Anticipates stable prices in most markets, with potential for modest increases in specific regions.
  • Reserve Bank of Australia (RBA): Acknowledges bubble risks but believes a full-blown scenario is unlikely given regulatory measures.

Nuance and Uncertainty:

  • CoreLogic: Highlights regional variations, with some areas expected to see price adjustments while others experience stability.
  • Property Investment Spruikers: Often promote continued growth, but their opinions should be viewed with caution due to potential bias.
  • Independent property commentators: Emphasize the need for individual analysis considering affordability, investment goals, and specific market dynamics.

Impact of Rising Interest Rates

Rising interest rates can have a significant impact on the housing market, as they increase the cost of borrowing and potentially reduce the demand for property. The current trend of increasing interest rates in Australia may contribute to property prices rising and a slowdown in property price growth.

For instance, the Reserve Bank of Australia’s cash rate has been on the rise, resulting in higher mortgage rates for both homebuyers and investors.

The majority of loans in Australia are variable rate, meaning that changes in interest rates can have a direct effect on mortgage repayments.

The potential impact of variable rate hikes on the Australian housing market may not be realised for another 2-3 months, but it is essential for homebuyers and investors to be aware of this risk and plan accordingly.

However, it is also crucial to consider that interest rate decisions can be influenced by various factors, such as international economic conditions or domestic politics. As a result, the future path of interest rates remains uncertain, and both homebuyers and investors should closely monitor the situation and adapt their strategies accordingly.

Government Policies and Their Effects

Government policies, such as support programs for first-home buyers and land tax options, can influence the housing market by increasing demand and affecting property prices.

Government support programs and the tax benefits for first-home buyers in New South Wales have encouraged more people to purchase property. This has led to an increase in demand.

Additionally, property owners in Australia are eligible for negative gearing on investment properties, exemptions from capital gains, and means tests on owner-occupied homes. These tax benefits can further contribute to the demand for housing and impact property prices.

The effectiveness of these government policies in addressing the current market challenges remains to be seen. As the Australian housing market continues to evolve, it is critical for homebuyers and investors to stay informed about government policies and their potential effects on the market.

Warning Signs and Risk Factors of a Housing Bubble

is australia in a housing bubble

Warning signs and risk factors for a potential housing bubble in Australia include:

  • Rising household debt
  • Deteriorating economic conditions
  • Reduced home buying capacity

For instance, elevated household debt can put pressure on numerous households and may contribute to a potential housing bubble.

Monitoring these warning signs and risk factors can help identify potential risks in the market and allow both homebuyers and investors to make informed decisions.

Some key warning signs and risk factors to watch out for include:

  • Increasing interest rates
  • High levels of household debt
  • Slow wage growth
  • Oversupply of properties
  • Economic downturn or recession
  • Government policy changes

As the Australian housing market continues to face challenges, it is essential to remain vigilant and stay informed about potential risks that could impact property prices and investment strategies.

Regional Variations in the Australian Housing Market

The Australian housing market is not uniform, with regional variations in property prices, demand, and supply. For instance:

  • Some popular regional areas have experienced a marked decrease in house prices.
  • Other sought-after areas have seen a decrease in property prices.
  • In contrast, home price growth has been more robust in the capital cities.

Factors such as local economic conditions, employment opportunities, and population growth can all contribute to regional variations in demand and supply for housing.

Implications for Homebuyers and Investors

is australia in a housing bubble

The implications of the current housing market situation for homebuyers and investors depend on individual circumstances and goals.

While some may see opportunities in the market, such as reduced interest rates, expanded access to financing, and potential for capital appreciation, others may face challenges due to rising prices and increased competition.

Ultimately, the future of the Australian housing market remains uncertain. One of the most vital steps for both groups is mastering how to research real estate to make informed decisions based on current market conditions.

And both homebuyers and property investors should carefully consider their individual circumstances and objectives when making decisions about property investments.

Staying informed about the market and monitoring key factors such as:

  • Property prices
  • Demand
  • Supply
  • Government policies

Can help navigate the complexities of the Australian housing market and make more informed decisions.


In conclusion, the Australian housing market is a complex and ever-evolving landscape, with factors such as property price trends, demand drivers, supply challenges, government policies, and regional variations all playing a role in shaping its future.

While expert opinions on the potential for a housing bubble remain divided, it is crucial for both homebuyers and investors to stay informed and vigilant, carefully considering their individual circumstances and goals when making decisions about property investments.

By understanding the intricacies of the Australian housing market and monitoring key factors, we can better navigate the uncertainties and seize opportunities as they arise.

Frequently Asked Questions

Will Australian property bubble burst?

With strong economic fundamentals, including high rental rates and increased migration, it is unlikely that the Australian property market will experience a crash.

Is Australia going through a housing crisis?

With only 400 dwellings for every 1,000 people, it is clear that Australia has been facing a housing crisis for the past 20 years. This is one of the lowest supply rates among developed nations.

Will house prices drop in 2024 Australia?

According to Westpac’s revised house price forecast, dwelling values are expected to stabilize in 2023 and rise 5% in 2024.

Therefore, house prices are unlikely to drop in Australia by 2024.

What factors contribute to the development of a housing bubble in Australia?

External events like the Global Financial Crisis, increased demand for property, and lack of supply can all contribute to the development of a housing bubble in Australia.

The Global Financial Crisis caused a decrease in the availability of credit, which in turn caused a decrease in the number of people able to purchase property. This decrease in demand caused a decrease in the price of property, which led to an increase in the price of property.

How do rising interest rates impact the Australian housing market?

Increasing interest rates make borrowing more expensive, reducing demand for property and leading to a slowdown in property price growth.

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