Aussies issued grim warning about house prices as top economist forecasts 'biggest correction' the country has ever seen

By AIDAN WONDRACZ, ASSISTANT NEWS EDITOR, AUSTRALIA Published: 05:02, 9 July 2026 | Updated: 05:05, 9 July 2026 A top economist has warned Australia could be hurtling towards the 'biggest correction in house prices we've ever seen'.  Coolabah Capital chief investment officer Christopher Joye labelled it the 'mother of all house price corrections', claiming the real estate market would be the hardest hit in Sydney and Melbourne. 'On the last three months of data, Sydney house prices are falling at a 12 per cent annual rate,' he told Yellow Brick Road chairman Mark Bouris on his Straight Talk podcast. 'Melbourne prices are also falling at a double-digit annual rate. 'So we have, potentially, the mother of all house price corrections. The biggest fall in national house prices ever recorded was 11 per cent.' Cotality data showed prices fell by 3.3 per cent in Sydney in the last quarter while its annual gains growth was at -0.1 per cent year-on-year. Melbourne experienced a 2.7 per cent dip during the quarter while its annual gain was 1.7 per cent.  Higher interest rates and tax changes in the May 12 budget are among the factors that have been blamed for the drop.  Coolabah Capital chief investment officer Christopher Joye warned Australia was barreling towards the 'mother of all house price corrections' Under the Albanese government's new legislation, the 50 per cent capital gains tax (CGT) discount will be scrapped, while negative gearing will be limited to newly constructed properties. Existing investments will be grandfathered, ensuring current property owners are not affected. Mr Joye labelled the changes as 'cataclysmic for the country'.  Mr Bouris echoed his sentiment, saying prices were 'falling like a stone', rubbishing claims made by Treasury that the tax changes would slow down growth. 'And in some places, some parts or states (are) worse than others, like Victoria. But it's bad. Sydney's bad,' he said.  REA Group data released last Wednesday showed home prices fell across almost every major capital in June, with Sydney and Perth recording the steepest declines of 0.5 per cent. Darwin bucked the national trend, with values edging up 0.2 per cent over the month.  The Northern Territory capital is now Australia's second-best performing housing market over the past year, behind only Perth.  Cotality data showed prices fell by 3.3 per cent in Sydney in the last quarter while its annual gains shrunk -0.1 per cent year-on-year (stock image) Mr Joye argued house prices were likely to fall even further if there was an immigration reset and more interest rate hikes. The Reserve Bank has kept the cash rate at 4.35 per cent, after three hikes earlier in the year, but Coolabah expects the figure to be increased to 4.75 or even five per cent. 'I think this would be one of the biggest, if not the biggest, corrections in house prices we've ever seen,' he said. 'I think it'll be a multi-year battle against inflation that will require the RBA to potentially lift interest rates a lot further.' Immigration has fallen over the last few years, with the number of overseas visitors reaching 301,000 in 2025 - down from the historic high of 550,000 in 2022. One Nation has vowed to reduce immigration to 130,000 while Prime Minister Anthony Albanese and Opposition Leader Angus Taylor will also slash numbers - though not as drastically as Pauline Hanson.  'That would be very, very negative for housing,' Mr Joye said. 'You have a combination of much higher interest rates … coupled with extreme tax, legal, regulatory and political uncertainty … and then you have a world in which the demand side driver that had been the gift that keeps on giving in the form of world-beating population growth suddenly disappears,' he said. 'And that can happen very quickly.  'If you turn off the immigration taps, you're not going to have any population growth… trivial population growth because we don't have much in the way of natural fertility. 'So I think the prospects for the housing market are a little grim.'