A growing chorus of economists is predicting a downturn in Australian house prices, with some predicting a sharp decline. The most radical forecast comes from HSBC Chief Economist Paul Bloxham, who predicts a 3-6% national decline next year, following flat prices in 2026. This prediction is based on rising interest rates, property tax changes, and a slowing economy. Bloxham argues that the positive momentum in house prices seen earlier in the year will be lost in the second half, leading to flat prices this year and a decline next year. The Reserve Bank of Australia's recent rate hikes and the federal budget's reforms, including the removal of negative gearing and the 50% capital gains tax (CGT) discount, are expected to further cool housing markets. AMP Chief Economist Shane Oliver shares a similar outlook, predicting a decline in house prices within the next six months, with Sydney and Melbourne already showing signs of weakness. Oliver attributes this to the after-tax return to investors falling due to tax changes, economic uncertainty, and rate hikes. He also notes that the market outlook is 'reasonably good' for first-home buyers, who will face less competition from investors. However, the broader economic outlook is weaker than the consensus, with a potential downturn in the housing market. Commonwealth Bank and ANZ have revised their forecasts downward, predicting 3% growth in 2026 and 2027, respectively, down from earlier estimates. The article highlights the impact of rising interest rates, tax changes, and economic uncertainty on the housing market, with a focus on the differing views of economists. It also mentions the decline in auction clearance rates in Sydney and the falling house prices in the city, further supporting the prediction of a downturn. The key question remains: how will these factors affect the broader economy and the housing market in the coming months?
