One of Australia's most respected economists has warned that cracks are emerging in Australia's 30-year housing 'super cycle' as rising interest rates and planned tax changes start to weigh on the property market.

AMP chief economist Shane Oliver said a housing super cycle is a long-term period, usually lasting 20 to 40 years, of sustained house price growth.

He said Australia's recent super cycle was driven mainly by falling interest rates and expanding credit, along with strong population growth, limited housing supply, tax breaks for investors, and more dual-income households.

But he said this is now coming under pressure from increasing long-term interest rates, worsening affordability, tighter tax concessions for property investors, and policy shifts towards lower immigration – all of which could threaten to end decades of house price gains.

He warned that Australians should expect prices to fall over the next 12 months.

'After 8.9 per cent growth in 2025 we now anticipate a fall in national average home prices of around 1 per cent this year and 5 per cent over 2026-27.'

He also predicted two more rate hikes, which would lift the Reserve Bank of Australia's official cash rate to a peak of 4.85 per cent, adding about $200 a month to repayments on a $600,000 mortgage.

For someone with a $600,000 mortgage and 25 years remaining, the three hikes so far in 2026 have already added $272 per month compared to the start of the year.

'The RBA has raised rates three times back to their prior 2023 cycle high. While it's likely to leave rates on hold this month we expect another hike in August.'

He said that the ratio of home prices to wages and incomes is at record highs, and that this, combined with rising mortgage rates, is widening the gap between what buyers can afford and current property prices.

He said that global factors are also weighing heavily on the outlook for Australian house prices.

'Confidence has plunged as have perceptions of whether it's a good time to buy a dwelling,' Oliver said.

'The longer the Strait of Hormuz takes to return to normal the greater the risk of recession & higher unemployment, which could be a big drag on property prices.'

Meanwhile, the May Budget's plan to scrap negative gearing for new purchases of existing homes and reinstate taxation on real capital gains with a minimum 30 per cent rate is likely to reduce investor demand.

'This is because the tax changes mean lower after-tax returns for investors going forward which will mean new investors will demand either lower prices or higher rents.'

Banks are now lending less to property investors because the tax changes have reduced their rental income.

Oliver urged caution on predictions the property super cycle is nearing its end, and said he made the same call five years ago, only for a post-pandemic immigration surge and chronic housing undersupply to extend it further.

'Calls for an imminent end to the property super cycle need to be treated with some caution though.

'I thought it might be close to over five years ago, but it was extended by a surge in immigration coming out of the pandemic and constrained home building resulting in a chronic undersupply of housing.

'A crash would require wide scale forced selling by homeowners – but without much higher unemployment forcing homeowners to sell this is unlikely as Australians will do whatever they can to keep servicing their mortgage.'

He said the super cycle is being supported by a housing shortfall estimated at around 300,000 homes.

'If it closes quickly thanks to stronger supply or a faster fall in immigration, then the super cycle upswing may well be over.'

Auction clearance rates have slumped to around 51 per cent nationally, the lowest level in six years, while prices in Sydney and Melbourne both fell in May.