Our property obsession is about to face its toughest test yet

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Australians have spent a generation treating property as the closest thing to a guaranteed wealth machine. Buy a home, borrow as much as the bank will lend, hold it long enough, and let the rising value do the heavy lifting.

For years, rising prices made that debt look like a cheat code for building wealth. But leverage cuts both ways. When prices rise, it can magnify gains. When they fall, it can increase the pain. After a long property boom, Australia’s obsession with housing is about to face its toughest test yet.

National home values have now fallen for five consecutive months. Recent data shows another 0.9 per cent fall in August, taking the decline from the national peak to 3.6 per cent. Sydney has been hit particularly hard, with values down 7.1 per cent from their February peak.

Markets are now virtually certain of another Reserve Bank rate rise this year, with the big question now whether the RBA moves as soon as the end of this month or waits for the next inflation data before potentially delivering the bad news on Melbourne Cup Day.

For mortgage holders, another 0.25 per cent rate rise is hardly academic and has real-world consequences. Housing is the largest household expenditure category, accounting for around a quarter of household expenditure, while Australia’s household debt burden remains among the highest in........

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