Why falling house prices won’t be an economic disaster

June 22, 2026 — 3:00am

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When consumers feel richer, they’re also more likely to loosen the purse strings, according to conventional economic wisdom. And for most of the last three decades, the biggest source of household wealth – real estate – has been heading in one direction: up.

So, what happens to household spending when people’s biggest asset starts losing value, instead of rising? And how much does it really matter for the wider economy?

With property prices now falling in Sydney and Melbourne, this is an issue that could affect a wide range of businesses, and I’m not just talking about real estate agents. Housing touches a huge range of sectors in one way or another, from construction to banking to retail.

But before getting too swept up in housing gloom, it is important to draw a distinction between the property market and the wider economy: they’re not the same thing.

What happens to house prices from month to month gets huge amounts of attention, and it does matter, but the value of housing assets is a very different thing from the economy’s performance.

It’s easy enough to understand why housing gets so much attention: it’s the biggest source of Australian household wealth, and its value has surged.

As the housing market slows, there are three things not to do

Millie MuroiEconomics Writer

Research firm Cotality estimates that the value of residential real estate hit $12.6 trillion in March. That’s roughly two-thirds of the total household sector’s net wealth of........

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