Australian Equity Strategy "Housing correction & wealth effect unwinds?"...

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Australian Equity Strategy "Housing correction & wealth effect unwinds?"...

Global Research

22 May 2026ab

Australian Equity Strategy Equity Strategy

AustralasiaHousing correction & wealth effect unwinds?

Richard Schellbach

Strategist

Budget shocks Aussie stocks richard.schellbach@ubs.com

+61-2-9324 2277

Last week's Federal Budget was the most consequential to investment markets in

decades. We believe the budget raises the risk of pressuring the property market, adding Lily Huang

Associate Strategistanother headwind to stock prices which were already facing challenges from

lily.huang@ubs.com

persistently high oil and a hawkish RBA. A property market unwind, and the associated +61-2-9324 2656

negative wealth effect impacts it would bring, has long been a tail risk for investors in

Australia. We believe this budget could raise the risk of this scenario playing out.

What if house prices stop rising...or even fall?

There has never really been a bear market in Aussie housing, the closest we came was

the short sharp slip in prices through 2018/19. That said, house prices were flat for half a

decade through the first half of the 1990's. Through both these periods Banks stocks

underperformed the market meaningfully (see figures 4 & 5).

Underweight sectors most exposed to housing slowdown risks

Our sector recommendations reflect our growing concerns that the domestic economy

is now facing a three pronged attack coming from, 1) the stagflation shock from

elevated oil prices, 2) An ongoing RBA rate hiking cycle, and 3) housing cycle headwinds

coming from the Budget tax changes. To provide some detachment from the risks of a

domestic housing / consumer unwind, we recommend being overweight the Mining,

Industrial and Healthcare sectors. Meanwhile we are underweight the sectors most