Bank stocks put the lie to an Aussie housing crash

Westpac Banking

25/08/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own. Updates to add graphics and context news.
By Antony Currie
MELBOURNE, Aug 25 (Reuters Breakingviews) - Fears of a housing crash in Australia are way overblown. That's not to say there aren't risks. Interest rates rising 75 basis points earlier this year was a big blow. But over the past couple of weeks some worrying-looking statistics have spooked the market. But bank stocks indicate worries of a disaster are not built on solid foundations.
Applications for mortgages, which account for around 70% of banks' loans and decent chunks of their earnings, fell 20% or more in recent months. Moreover, house prices are down an average 2% or so nationally over roughly the same period, per property research firm Cotality; they could plummet 15% or more in some cities, reckon analysts at ANZ ANZ.AX , which would be the biggest drop since 1983. As a result, shares in the country's Big Four lenders - ANZ, Commonwealth Bank of Australia CBA.AX, National Australia Bank NAB.AX and Westpac WBC.AX - have fallen around 10% on average this month.
Yet the lenders all still sport enviable multiples, with Commonwealth's stock at 3.3 times expected book value 12 months from now and its three rivals' between 1.5 and 2 times. That's better than the past two housing downturns in 2017 and 2022, when prices fell around 8%.
Why the disconnect? First, the current hit to the banks seems limited to earnings, unlike four years ago when rapidly rising interest rates raised the real prospect of a home loan-sparked credit crunch. Increased commercial lending - not least to the tech, AI and defence sectors - and investment banking are also softening the blow.
Crucially, the housing market Down Under has been on a tear this century, with the average dwelling price increasing fivefold, making homes less affordable for many. That was fuelled in part by the right-wing government in 1999 allowing property owners to get tax breaks on investment homes they rented out. The current left-leaning Labor government reversed that in May for new purchases. Unsurprisingly, property investors balked: their mortgage applications plunged 28% at Commonwealth since May, compared with a 9% decline from wannabe owner-occupiers.
Imagine that leads to a 10% decline from the national peak in March: that would only put prices back to where they were 15 months earlier. In the frothy Perth market, buyers would only time-travel back to September.
There's also a pretty concrete, albeit alarming, foundation underpinning Australian house prices: there's barely enough supply to meet demand, and the increasing cost of labour and supplies is crimping new homebuilding.
All bets are off if a recession hits and unemployment shoots up from its current 4.5% rate. Absent that, resilient bank valuations are putting the lie to a housing disaster Down Under.
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CONTEXT NEWS
Economists at National Australia Bank on August 24 said they expect home prices to keep falling for at least another six months.
They have already fallen some 2% nationally since May, according to data from Cotality released on August 3, with the average price of dwellings in Sydney and Melbourne down more than 5% compared with peak levels earlier this year and late last year.
     

(Editing by Robyn Mak; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))