Greek Australian businessman and Yellow Brick Road executive chairman Mark Bouris is sounding the alarm over Australia’s housing market as property prices fall for a fifth consecutive month.
“Cracks are appearing,” Bouris warns, as the country’s housing boom begins to show signs of a much deeper correction.
National dwelling values have fallen almost 5 per cent from their March peak, while Sydney has suffered a 7.1 per cent decline and Melbourne is down 6.5 per cent.
Even markets that had continued to show resilience, including Brisbane, Perth and Adelaide, are now moving backwards.
For Bouris, the problem is not simply falling house prices.
It is what happens when falling prices collide with enormous mortgages, higher repayments, tighter lending and borrowers who entered the market with very little equity.
The warning signs are multiplying
Homes are now taking longer to sell, with the median property reportedly spending around 38 days on the market, the longest stretch since October 2022.
New loan commitments have fallen by more than 5 per cent over the latest quarter, while investor lending has dropped by more than 10 per cent.
Prices are falling.
Borrowing is slowing.
Buyers are pulling back.
And households are still dealing with the impact of higher interest rates.
That combination is putting increasing pressure on the Australian housing market.
First-home buyers are particularly exposed
One of the biggest risks sits with recent buyers who entered the market with very small deposits.
Government schemes have increasingly helped Australians buy homes with deposits as low as 5 per cent, allowing younger buyers to enter the market sooner.
Applications from Australians aged 18 to 25 reportedly jumped almost 23 per cent after the scheme was expanded last October.
But small deposits leave borrowers with very little protection when prices fall.
Consider a couple who bought a $900,000 Sydney property with a 5 per cent deposit.
They would have contributed $45,000 and borrowed about $855,000.
After Sydney’s 7.1 per cent decline, that property would be worth roughly $836,000.
Ignoring principal repayments, the couple would owe around $19,000 more than the property is worth.
Their entire original deposit would effectively have been wiped out.
That is the danger of high leverage.
A percentage decline that looks relatively modest on a property chart can represent tens of thousands of dollars for a highly indebted household.
Mortgage stress is adding to the pressure
There are also signs that financial stress is beginning to emerge among newer borrowers.
First-home buyers using low-deposit schemes are reportedly experiencing mortgage arrears at a seven-month high, with some groups recording arrears at roughly twice the rate of other borrowers.
In Victoria and Western Australia, first-home buyer arrears have reportedly approached 0.9 per cent, compared with around one-third of that level among non-first-home buyers.
These figures do not suggest that Australia is already experiencing a mortgage crisis.
But they highlight where pressure can appear first.
Recent buyers generally have smaller deposits, less accumulated equity and larger mortgages relative to their assets.
Roy Morgan data has also placed mortgage stress at its highest level since the Global Financial Crisis.
More pain could be coming
The banking sector is also warning that property prices may have further to fall.
Commonwealth Bank has forecast additional declines of around 6 per cent for Sydney and 7 per cent for Melbourne this year.
HSBC has flagged the possibility of a national peak-to-trough decline of as much as 13 per cent.
Those are forecasts rather than guarantees.
But if falls approach anything like those levels, the impact will not be evenly distributed.
A homeowner who bought 15 years ago may still have substantial equity despite a significant fall.
A young couple who bought recently with only 5 per cent down could see their entire financial buffer disappear.
The uncomfortable truth about housing affordability
Falling property prices can eventually make homes more affordable for future buyers.
But cheaper houses do not automatically mean cheaper home ownership.
If interest rates remain elevated and borrowing capacity is reduced, buyers may still struggle to purchase even as property prices decline.
For existing borrowers, meanwhile, a falling property value does not reduce the mortgage.
The debt remains.
Only the value of the asset backing that debt changes.
That is why the current correction matters.
Australia spent years building a housing market heavily dependent on credit, large mortgages and continued capital growth.
As prices rose, the risks were easier to overlook.
Rising values created equity and helped borrowers withstand large debts.
Now prices are moving in the opposite direction.
And as Greek Australian Mark Bouris puts it, the cracks are appearing.