Australia’s housing problems will take ‘generation’ to fix, NAB economist warns

• NAB forecasts a 7% peak-to-trough decline in capital city property prices, but economists warn this fall will not be sufficient to solve Australia’s deep-seated housing affordability crisis.
• Experts testify that resolving housing inequity will take approximately a generation and requires a sustained increase in housing supply to counter decades of price growth driven by financial deregulation and tax settings.
• Research highlights growing rental instability, noting a 20% increase in children living in rental households who move an average of six times by the age of 14.

While Australia’s housing market is bracing for a notable downturn, experts warn that falling property prices will do little to mend the nation’s deep-seated affordability crisis. NAB Chief Economist Sally Auld recently informed a Senate inquiry that the structural issues plaguing the market have been building for decades and will likely require an entire generation to resolve.

NAB currently projects a 7 per cent peak-to-trough decline in home prices across Australia’s major capital cities, with a 5 per cent drop anticipated during the 2026 calendar year. Despite this softening market, Dr. Auld emphasized that price corrections are not a panacea for those struggling to enter the market. She argued that meaningful progress can only be achieved through a sustained, long-term increase in housing supply, rather than temporary market fluctuations.

The social consequences of this ongoing crisis are becoming increasingly visible, particularly for the next generation. Recent research highlights a 20 per cent surge in the number of Australian children growing up in rental properties since the turn of the century. On average, these children move house six times before they reach the age of 14, illustrating the growing instability faced by families locked out of homeownership.

Testifying before the Senate select committee on intergenerational housing inequity, Dr. Auld noted that property prices have consistently outpaced income growth since the early 2000s. She attributed this trend to a combination of lower interest rates, specific taxation settings, and robust demand, labeling housing affordability as one of Australia’s most pressing economic and social hurdles.

Westpac Chief Economist Luci Ellis, a former Reserve Bank assistant governor, also provided historical context to the committee. She suggested that today’s high valuations are the multi-decade consequence of financial shifts from the late 20th century. Specifically, she noted that the introduction of inflation-targeting frameworks in the early 1990s and the financial deregulation of the 1980s and 90s created the economic environment that allowed property prices to reach their current heights.

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