Australia’s housing correction may still have further to run. Commonwealth Bank now expects national dwelling prices to fall around 9% from their peak, with Sydney forecast to fall as much as 13%, Melbourne 12%, and Brisbane, Perth and Adelaide around 8%.
The direction of interest rates will be critical. Cheaper borrowing could eventually help stabilise prices, but Commonwealth Bank does not expect rate cuts until next year. Its modest forecast for a housing recovery in 2027 relies partly on the RBA cutting rates in May and August.
If those cuts are delayed, property prices could remain flat for longer. If the RBA raises rates again, as Commonwealth Bank currently expects it will, the pressure on borrowers and house prices would increase further.
The effects would also extend well beyond homeowners, as falling property values can make households feel less wealthy, leading them to cut spending and save more. For an economy already growing at close to half-speed, another extended housing downturn would place even more pressure on retail spending, construction and employment.
Previous Australian housing corrections provide an interesting comparison with gold. Between 2017 and 2019, combined capital-city home values fell around 8.2%. Over roughly the same financial-year period, the Australian gold price increased from approximately $1,616 to $2,012 an ounce, a rise of almost 25%.
The next major correction arrived during 2022 and early 2023, when capital-city values fell approximately 8.1% as interest rates rose sharply. Across the 2022–23 financial year, Australian-dollar gold increased from around $2,661 to $2,858 an ounce, a gain of more than 7%.
Gold did not rise simply because Australian property prices fell. The two assets respond to different forces, with overseas interest rates, global uncertainty and movements in the Australian dollar also playing important roles. However, both recent corrections show why investors may hold gold alongside property rather than treating the two assets as interchangeable.
Australian households already have an unusually large share of their wealth tied to housing. If property values continue falling while borrowing costs remain high, gold’s ability to sit outside the property and credit cycle may become increasingly important.
Property is heavily dependent on access to credit. When interest rates rise, buyers can borrow less, repayments increase and demand generally weakens. Property is also difficult and expensive to sell quickly.
Gold does not rely on a mortgage or the willingness of banks to lend. Its Australian-dollar price is influenced by the international gold market and the value of our currency. During periods of economic stress, a weaker Australian dollar can lift the local gold price even when movements in the US-dollar gold price are more modest.
History does not guarantee that gold will rise during every housing downturn. However, its different price drivers are precisely what can make it useful within a diversified store of wealth.
This article is general information only and does not constitute financial advice. Economic conditions and precious-metal prices can change quickly. Readers should consider their own circumstances and conduct independent research before making investment decisions.
