Middle East conflict could trigger Australian housing market downturn by 2026
ANZ has warned that prolonged conflict in the Middle East could push Australian home loan rates even higher. The bank now expects house prices to fall this year, reversing earlier predictions of growth. Rising oil prices and inflation fears are adding pressure to an already weak housing market. Before the conflict escalated, ANZ had forecast a 2% rise in house prices for 2024, down from an earlier estimate of 5%. But surging global oil prices—now above $100 per barrel—and higher wholesale mortgage rates have changed the outlook. The bank now predicts a 2% drop in prices by the end of 2026.
The housing market had already been stagnant for three years, with little momentum before tensions flared. While household confidence briefly returned to normal levels before the war, the conflict has since dampened buyer sentiment. ANZ warns that a drawn-out crisis could lead to sharper price declines.
Borrowers are already facing higher interest rates, even though the Reserve Bank has not raised the official cash rate. If the conflict persists, further increases in home loan costs are likely, squeezing affordability even more. The Middle East conflict is now a key risk for Australia's housing market. Higher borrowing costs and inflation fears may discourage buyers, pushing prices down. ANZ's revised forecast reflects these growing economic pressures.
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