A leading economist has warned that Australia may be heading towards the "biggest correction in house prices we've ever seen". Christopher Joye, chief investment officer at Coolabah Capital, told a podcast that Sydney and Melbourne would be hit hardest, describing the situation as the "mother of all house price corrections". The warning matters because the previous record fall in national house prices was 11 per cent, and current data suggests some cities are declining at an even faster rate.

Joye said Sydney prices were falling at a 12 per cent annual rate over the past three months, with Melbourne also dropping at a double-digit rate. Cotality figures showed Sydney prices fell 3.3 per cent in the last quarter and Melbourne 2.7 per cent. He blamed higher interest rates and tax changes in the 12 May budget, under which the Albanese government will scrap the 50 per cent capital gains tax discount and limit negative gearing to newly built properties, though existing investments will be grandfathered. Joye called the changes "cataclysmic for the country".