HSBC Forecasts Record Australian House Price Crash

HSBC has forecasted that Australian house prices will decline by 13% nationally by mid-2027, surpassing the largest price crash of 8% between 2017 and 2019. According to HSBC's economists, this correction would be the largest housing price adjustment in modern history.

The predicted drop is expected to occur from April, with nearly 5 percentage points already seen since then. The government's tax changes, including scrapping the capital gains tax discount from July 2027 and banning negative gearing on existing housing, are major contributors to this decline.

Negative gearing allows investment losses to be offset against taxable income, which has been a long-standing policy in Australia. However, HSBC notes that these changes have already had a sharp impact on the country's property market.

The Reserve Bank of Australia (RBA) has raised interest rates three times this year, with markets pricing in another hike after strong inflation results for July. HSBC forecasts additional rate increases in September and November, which will further dent demand from homebuyers.