Dire warning of house price wipeout in Australia over fears values could plunge $270,000

By SARAH BROOKES - SENIOR REPORTER, AUSTRALIA Published: 02:10, 13 July 2026 | Updated: 02:23, 13 July 2026 House prices could plunge as much as $270,000 if the Albanese government fixes the housing shortage and hits its target of 1.2million new homes by 2029, new modelling reveals. Australia is already 125,000 homes behind its ambitious housing target, with experts warning every year of delay could make the eventual property market correction even more severe. Research commissioned by OurTop10.com.au and conducted by Primara Research found closing the housing shortfall would slash average home prices by $270,000, or 22.6 per cent, compared with a scenario where under-building continues.  The modelling found that if unemployment and interest rates remained around current levels, building enough homes to meet demand would put significant downward pressure on house prices over the next decade.   However, buyers are unlikely to see any immediate relief, with changes to housing supply taking up to 21 months to flow through to prices. Even if governments acted immediately, home values would continue tracking along their current trajectory before eventually diverging as more homes reached the market. Primara Research head of data and research Peter Drennan said the modelling effectively showed where the housing market could be headed over the next seven years.  Under the modelling, average house prices would climb from about $925,000 in September 2023 to a peak of $1.15million in September 2027, before retreating to $927,000 by the end of 2031 if the government's housing target is met. Most regions have seen home values drag lower over recent months, with the largest downgrades in Perth and Brisbane according to Cotality research 'For buyers who've priced themselves out of the market, this is what closing the supply gap is actually worth, a genuine shot at getting in at a price last seen two-and-a-half years ago,' Mr Drennan said. The findings come as the Albanese government pushes to deliver 1.2million new homes by 2029 under its National Housing Accord. To reach that goal, Australia would need to build about 240,000 homes every year.  However, federal government projections indicate the target is unlikely to be met until June 2030 - a year after the accord is due to end. The shortfall has been blamed for intensifying the housing crisis, driving up prices and making home ownership increasingly out of reach for many Australians.  Independent economist Saul Eslake said it was simple economics that increasing housing supply would inevitably put downward pressure on property prices. 'The Government cannot bring themselves to say we want cheaper housing,' he told The West Australian. 'Why? Because for all the megalitres of crocodile tears that politicians of all stripes routinely shed for the difficulty facing first-homebuyers, they know for any given year there's only between 100,000 to 150,000 of them. Prime Minister Anthony Albanese (pictured) speaks to the media during a visit to a future housing site in Canberra as his government struggles to meet its ambitious housing target 'So even if you assume for every one that succeeds in buying a home, there's five or six that don't. At most, you have one million votes for cheaper housing. 'Whereas there are 11 million people who own their own dwelling, at least two million people that own an investment property, although they overlap. 'That leaves you with at most one million votes for cheaper housing and 11-12 million votes for more expensive housing, so even our dumbest of politicians can do this maths and they do.' Cotality's research director Tim Lawless said most regions have seen values drag lower over recent months, with the largest downgrades in Perth and Brisbane. 'We are seeing affordability hurdles weighing on buyer demand,' he said. 'Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions.'  Fresh figures from the Australian Bureau of Statistics also highlight the challenge. The ABS reported total dwelling approvals fell 1.1 per cent in May to 17,019, driven by a sharp decline in apartment and higher-density projects. The fall in the number of homes being built has been driven by a more than 10 per cent fall in apartment approvals Should lowering house prices to help buyers come at the cost of current homeowners' wealth? What's your view?'The fall in total dwellings approved was driven by a 10.4 per cent fall in private dwellings excluding houses, after a 4 per cent April rise,' ABS head of construction statistics Daniel Rossi said. But there was some positive news, with approvals for private houses rising 2.8 per cent to their highest level since September 2021. 'This is the fourth consecutive month with over 10,000 private sector houses approved,' Mr Rossi said. Despite the monthly decline, the total number of dwellings approved remains 5.3 per cent higher than a year ago.