This transcript was generated automatically and may contain small errors.
If these three data points all line up, the property market will crash. If you've been looking at house prices that seem to never stop growing and the fear-based content online all talking about a property market crash, have you ever wondered what data points you could actually monitor to know if this is going to happen? That is exactly what we're going to talk about in this episode. No buzzwords, no fear-mongering. We let the data tell the story of what could cause a property market crash.
I'm Jooma, Senior Research Analyst at InvestorKit. Now let's get into it. When we talk about a property market crash, we're not talking about a correction phase where property markets might decline by 10% in a year or a suburb's house price decline by 20%, but it's not happening to all suburbs across the country. We should be talking about an average 20% decline in every market across the country. It might take years to recover and to cause that level of crash, we would be looking at the crash in fundamental drivers of the housing market.
And when we think about housing fundamentals, it's either demand or supply. From a demand perspective, we will be thinking of credit availability and population growth. So first, credit availability. Housing is an expensive expenditure. We have to borrow to be able to buy.
If one day we cannot borrow anymore or our borrowing capacity shrank by 80-90% and we couldn't afford any housing market across the country, that would be when demand is seriously damaged. Looking back in history, almost every boom that happened was triggered or at least contributed to by looser lending, either lower interest rates or looser regulation from governing bodies like APRA. Almost every correction or stagnation period would be accompanied by high interest rates or surging interest rates or tightened regulation from governing bodies. But the thing is, this tightened regulation or increased interest rates wouldn't really lead to a crash. An example is from 2022 to 2024 when interest rates surged at the highest pace in history.
Yes, a lot of cities went into a correction phase right following the interest rate surge, but that correction didn't last for long. By 2024, many cities have already entered the recovery phase. For a market to crash, we will need a serious credit freeze. For example, what the US experienced during the GFC. But in the near term, we do not foresee that scale of a financial crisis.
And then the second demand side fundamental we want to talk about is population growth. And for Australia specifically, we're talking about migration because more than 80% of Australia's population growth is contributed by immigration. And according to an ABS forecast, if immigration stopped, Australia's population would be declining in 10 years. And population decline is a serious issue. It has a huge range of economic impact.
If population stops growing, we would be facing much less housing demand, especially in a new housing demand. Therefore, a property crash would be possible. But that likelihood is extremely low because immigration is part of Australia's population policy to make sure the economy grows smoothly. In the coming 10 years, the number of incoming immigrants as a percentage of the total population would be declining year by year. But the decline would be gradual from the current close to 1% to slightly lower than 0.
8% in 10 years. That level of decline is not going to cause any serious drop in new housing demand. And as a result, from a population growth perspective, the likelihood of a property crash is also extremely low. And then we also need to consider it from a supply side. And when it comes to supply, oversupply is the growth killer.
So if there is a massive oversupply issue in the near future, that could cause serious property market crash. Looking back in history, we've seen prices stopping to grow or even declined because of a serious imbalance between demand and supply. For example, in 2013-2014, when the mining boom ended, mining-reliant cities, even the biggest cities like Perth, entered a prolonged period of no growth in the property market. Because population growth seriously slowed at the same time, supply continued to increase and that imbalance caused an oversupply issue, especially in 2013-2014. As a result, in Perth, we didn't see much growth from 2013 to 2020.
And in Darwin, we actually saw price declined from 2014 to 2020. And then a much more recent example is Canberra. In 2022, when interest rates went high, demand decreased fast in the Canberra's property market. We saw a consistent increase in the number of for-sale listings all the way from 2022 to 2024, even into 2025. And at the same time, demand stayed low.
This mismatch between the increasing supply and the suppressed demand created its own oversupply phase. And that has essentially led to no growth from 2022 to 2025. But what's the likelihood of this oversupply issue happen across the country? It's actually quite low because what we are seeing now is population has surged from 2022 to 2024. Now it has slumped, but we've already received a lot more people than the current housing system can hold.
In the established housing market, there is already a serious supply crunch. And when it comes to incoming supply, construction is not catching up with the new household formation. And according to a 2025 report, in the coming four years up to 2029, new housing demand will continue to exceed new housing supply. So what we are seeing now is that housing supply will continue to be constrained for the coming years instead of an oversupply risk. So if you are concerned if the market is about to crash, make sure that you monitor these three things.
If population all of a sudden starts to decline, we start to build a huge amount of houses and banks stop lending, we'll probably head to a crash. But unless these three things all cross over at the same time, the Australian property market is resilient and healthy for property investors. I'm Jooma, the Senior Research Analyst at InvestorKit. I'll see you next time.
