--- title: "Everyone Says the Economy Is Terrible. Here's Why You Should Buy Property Anyway." description: "Unemployment is up, businesses are closing, yet Melbourne house prices keep climbing. Historical data shows Australian property and the economy have been decoupled for 40 years. Here's why." author: Joey Don date: 2025-11-27 category: Market Analysis url: https://premiumrea.com.au/blog/economy-bad-still-buy-property-melbourne-2024 tags: ["economy", "property market", "recession", "interest rates", "Melbourne", "migration", "housing supply", "RBA"] --- # Everyone Says the Economy Is Terrible. Here's Why You Should Buy Property Anyway. *By Joey Don, Co-Founder & CEO at PremiumRea — 2025-11-27* > Your mate just got laid off. The cafe down the street closed. The news says recession is coming. And Melbourne house prices posted their strongest quarter in three years. Something doesn't add up — unless you understand how Australian property actually works. Everyone I talk to says the same thing. "Yan, the economy is tanking. My friend just lost his job. Shops are closing everywhere. How can you tell people to buy property right now?" I'm going to say something that might sound reckless: the worse the economy gets, the stronger the case for buying property becomes. Not weaker. Stronger. Before you flame me in the comments — hear me out. I'm going to show you 40 years of data that proves Australian property prices and the broader economy are far less connected than you think. And then I'm going to explain the specific mechanism that makes bad economic news actually beneficial for property prices. The answer involves the RBA, migration, and a supply shortage that no amount of economic weakness can fix. ## Forty years of evidence: property doesn't follow the economy Pull up any chart of Australian residential property prices alongside GDP growth over the past four decades. What you'll see might surprise you. During the early 1990s recession — when unemployment hit 10.9% and GDP contracted — Melbourne house prices dipped for approximately one quarter before resuming their upward trajectory. During the GFC in 2008-2009, Australian property barely flinched while global equity markets halved. During COVID in 2020, property dropped briefly before staging its largest boom in a generation [1]. The pattern is consistent: property downturns in Australia have never lasted more than six consecutive months. Not once in 40 years. Every correction was short, shallow, and followed by a recovery that exceeded the previous peak [1]. Why? Because Australian residential property is not primarily driven by the domestic economy. It's driven by population growth, migration policy, and housing supply — factors that operate independently of GDP growth. When the economy weakens, people don't stop needing somewhere to live. They don't evaporate. If anything, a weaker economy forces more people into rental accommodation (because they can't afford to buy), which tightens the rental market and pushes rents up. Higher rents flow through to higher property values with a lag. > "The chain from 'bad economy' to 'lower property prices' is extremely long," says Yan Zhu. "People sell their car first. They cut dining out. They cancel the holiday. They downgrade their phone plan. The house is the absolute last thing they sell. By the time enough people are selling houses to move the market, the economy has usually already started recovering." ## The RBA response: bad economy equals lower rates Here's the mechanism that makes economic weakness bullish for property. When the economy slows, the RBA cuts interest rates to stimulate activity. Lower rates mean lower mortgage repayments. Lower mortgage repayments mean higher borrowing capacity. Higher borrowing capacity means more buyers can enter the market. More buyers competing for a fixed supply of housing pushes prices up [2]. The US Federal Reserve has already pivoted to cutting rates, with its September 2024 cut signalling the turn in the global rate cycle. The new Fed chair is widely perceived as dovish. Australia tends to follow the global rate cycle with a lag, and the consensus among economists is that the RBA will begin cutting rates in the first half of 2025 [2]. Every 0.25% rate cut adds approximately $20,000 to the borrowing capacity of a household earning $130,000 per year. If the RBA delivers three cuts in 2025 (which is the market's base case), that's $60,000 of additional borrowing capacity flowing into the housing market. That money has to go somewhere, and in a supply-constrained market, it goes straight into prices [3]. So the paradox resolves itself: bad economy → RBA cuts rates → borrowing power increases → property prices rise. It's happened in every single Australian economic downturn since the 1990s. There's no reason to expect this cycle to be different. ## Migration: the demand factor the economy can't switch off Australia's property market is fundamentally a migration story. In the 12 months to June 2024, net overseas migration to Australia was approximately 500,000 people [4]. That's 500,000 additional humans who need housing. They're not camping in parks. They're renting apartments, sharing houses, and — as soon as they have residency and savings — buying property. And they're disproportionately settling in Melbourne and Sydney, because that's where the jobs, universities, and community networks are. The crucial point: migration numbers are determined by federal government policy, not by the state of the economy. Even during COVID, when the borders were closed, the government had already set the quota for post-reopening migration at record levels. Economic weakness doesn't reduce migration — if anything, governments increase migration during downturns to stimulate demand and fill labour market gaps [4]. 500,000 new residents per year. Construction running at roughly 170,000 new dwellings per year [5]. That's a structural deficit of 330,000 homes per year. The economy could be in recession and this gap would still exist. It's a supply-side problem that monetary policy and economic conditions cannot solve. This is why property prices kept rising through every economic wobble of the past two decades. The demand is structural. The supply shortage is structural. The economic cycle is just noise layered on top. ## What you should actually worry about (and what doesn't matter) If the economy is mostly irrelevant to property prices, what actually matters? **Interest rates.** This is the single biggest driver of short-term property price movements. Rate cuts are coming. When they arrive, they'll be the strongest tailwind Melbourne property has had since 2020. **Supply.** Victoria's rental stock has shrunk by 20,000 properties in 18 months [6]. New construction is running well below demand. Until the supply gap closes — which is years away at current building rates — prices will have structural support. **Affordability band.** The properties most sensitive to rate cuts are the ones at the affordable end — $600,000-$850,000. That's where the first dollar of increased borrowing capacity gets deployed. If you're buying in this band, you're positioned for the maximum benefit from rate cuts. **What doesn't matter:** newspaper headlines about GDP growth, anecdotal evidence about businesses closing, or your cousin's friend who got laid off. These are real human stories, and I don't minimise the pain. But they don't predict property prices, and making investment decisions based on them means you'll be permanently sitting on the sideline while the market moves without you. Our recommendation hasn't changed: buy affordable houses on large blocks in suburbs with strong rental demand. Buy them now, while the broader market sentiment is still cautious and competition is below normal levels. When the rate cuts arrive and the headlines shift from "economy in trouble" to "Melbourne property booming," the buying window will close — and it'll close fast. > "I tell every client the same thing," says Yan Zhu. "Don't listen to what people are saying about the economy. Look at what the data is doing. The data says: vacancy rates at record lows, migration at record highs, rate cuts on the horizon, and affordable Melbourne suburbs already growing 8-12%. If that's not a buy signal, I don't know what is." ## References 1. [CoreLogic, 'Australian Residential Property — 40 Year Performance Review'. Historical analysis of property cycles vs economic cycles.](https://www.corelogic.com.au/) 2. [Reserve Bank of Australia, 'Statement on Monetary Policy', November 2024. Forward guidance and rate outlook.](https://www.rba.gov.au/publications/smp/) 3. [Canstar, 'How Interest Rate Cuts Affect Borrowing Power', 2024. Impact of 0.25% cut on household borrowing capacity.](https://www.canstar.com.au/home-loans/) 4. [Australian Bureau of Statistics, 'Overseas Migration', June 2024. Net overseas migration approximately 500,000.](https://www.abs.gov.au/statistics/people/population/overseas-migration) 5. [Australian Bureau of Statistics, 'Building Approvals', September 2024. Annual dwelling approvals ~170,000.](https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia) 6. [Australian Financial Review, 'Victoria Loses 20,000 Rental Properties in 18 Months', 2024.](https://www.afr.com/property) 7. [Westpac Economics, 'Australian Interest Rate Forecast', November 2024. Consensus: 3 rate cuts in H1 2025.](https://www.westpac.com.au/) 8. [PremiumRea portfolio data. Southeast Melbourne growth rates and rental yields, 2024.](#) --- Source: https://premiumrea.com.au/blog/economy-bad-still-buy-property-melbourne-2024 Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent