Why Australia's housing shortage keeps prices resilient

Everywhere you look right now, the narrative feels the same. Interest rates are high, inflation has squeezed households, AI is raising job concerns, and recession fears are creeping back into the headlines. On the surface, it sounds like the perfect setup for a property crash. If people are under pressure, surely they won't be able to hold onto their homes. It's a compelling argument, but it doesn't fully reflect what's actually happening.

The real story comes down to the core driver of any market, supply and demand. For property prices to fall significantly, you typically need either a collapse in demand or a surge in supply. Right now, neither is happening in Australia.

Demand remains strong. Migration continues to fuel population growth, meaning more people need housing. At the same time, unemployment has stayed relatively stable, so most homeowners are still earning an income and servicing their mortgages. Demand hasn't disappeared, it's quietly building.

However, the real pressure point is supply. Australia simply isn't building enough homes, and the gap is widening. Forecasts suggest the country could fall short of its targets by hundreds of thousands of dwellings over the coming years. Construction costs remain high, labour shortages persist, and many developers are stepping back as projects become less financially viable.

So, while some expect a wave of forced selling, the reality is there aren't enough properties available in the first place. When supply is this tight, prices don't tend to collapse. They hold up far better than many expect, and over time, they tend to push higher.

Interest rates are often seen as the tipping point, as higher repayments should force selling, but history tells a more nuanced story. In the late 1980s, interest rates in Australia rose above 15%, yet property prices still experienced strong growth. The key reason was that demand remained firm while supply stayed constrained.

That same dynamic is in play today. Higher rates can slow the market and take some heat out of prices, but they don't automatically trigger a crash, especially when people still need housing and there aren't enough homes to meet that demand.

The recession argument sounds logical, but for a property crash to occur, several conditions need to hit at once, widespread job losses, forced selling, and excess supply flooding the market. Right now, that combination simply isn't there. Instead, we're seeing population growth, ongoing government support, and a construction pipeline that continues to fall short.

That's why the idea of a major property crash keeps resurfacing but rarely plays out as expected. The market may have periods of weakness, and sentiment will shift, but the underlying imbalance between supply and demand remains.

At its core, Australia's housing market is dealing with a shortage, not a surplus, and until that changes in a meaningful way, prices are more likely to trend higher over time. Not in a straight line, and not without setbacks, but with a clear long-term upward bias.

What are the best and worst-performing sectors this week?

The best-performing sectors include Energy, up more than 5%, followed by Utilities and Consumer Staples, both up more than 2%.

The worst-performing sectors include Materials, down more than 5%, followed by Information Technology, down more than 4%, and Healthcare, down more than 3%.

The best-performing stocks in the ASX top 100 include Telix Pharmaceuticals, up more than 9%, followed by Woodside Energy Group, up more than 8%, and Challenger Limited, up more than 7%.

The worst-performing stocks include Pilbara Minerals, down more than 15%, followed by Northern Star Resources and WiseTech Global, both down more than 12%.

What's next for the Australian stock market?

The All Ordinaries Index took another hit this week, finishing Thursday down 1.7% and marking a third consecutive week of losses. It's starting to feel like a fear-driven decline now, with sentiment clearly outweighing logic in the short term. That said, despite all the pressure, the market is still holding above the critical 8650 level, but only just.

We're now sitting roughly 8% down from the all-time high set in February, which is not unfamiliar territory. We saw a very similar move after the previous high back in October 2025, where the market also pulled back around 8% before eventually recovering to new highs. The difference this time is the speed and volatility of the move. Markets seem to be getting sharper, faster, and a lot more reactive to news flow.

It's the classic case of markets taking the stairs up and the elevator down. Fear tends to hit harder and faster than optimism, and that's exactly what we're seeing play out right now.

If you look at the broader backdrop, it's not hard to see why. The global situation feels tense. Every day there are new developments around energy infrastructure in the Middle East, and whether it's oil or gas, the result is the same, higher prices and more inflationary pressure. That uncertainty is keeping investors on edge and driving a lot of the recent selling.

But it's important to zoom out a little. Outside of this geopolitical tension, there are still areas of stability in the global economy. Markets aren't collapsing across the board, they're reacting to a specific set of risks, and history shows that when those risks begin to stabilise, markets can turn quite quickly. That turning point is often where the biggest opportunities present themselves.

From a technical perspective, the trend in the short term is still down. But we're now sitting right at a critical level, and this is where it gets interesting. The 8650 level continues to act as a line in the sand, and if it holds, the possibility of a rebound remains very much alive.

Seasonality also starts to come into play here. As we move toward April, which is typically one of the stronger months for the market, you must at least consider the potential for a recovery move. A push back toward the 9,000 level wouldn't be out of the question, even if it means the market ends up trading sideways for a period rather than trending strongly higher straight away.

Even in a sideways market, there are always opportunities. The difference is that they tend to favour those who are prepared, selective, and well positioned.

For now, the market is under pressure, sentiment is fragile, and volatility is elevated, but we're also at a point where things can shift quickly. The key is to stay focused, respect the levels, and be ready, because when the market does turn, it rarely gives much warning.

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