Trail Homes’ Nick Young sees mild recession risk ahead, but mortgage brokers who stay close to clients will be remembered
The Australian economy could be creeping towards a mild recession, reckons Nick Young (pictured), head of trail book purchaser Trail Homes, who says persistent fuel costs, government-driven inflation and a political push to cut immigration leave little room for a quick turnaround.
Young, who has more than 20 years in mortgage broking, sees Australia's economy as running on two engines, but only one is working right now.
"There are two things… in Australia that drive the economy. One is mining and one is property. Mining is chugging along quite nicely. Property has just been shot to bits," he said.
Young pointed to the May 2026 federal Budget as a blow to business confidence across both commercial and residential property. The Budget limits negative gearing to new builds from 1 July 2027 and overhauls the capital gains tax (CGT) discount, changes that have led forecasters to tip house prices to fall as much as 15% from peak to trough.
Brokers are feeling it at the coalface. "They'll be well and truly aware that valuations are not what they were and serviceability is much harder than what it was… The banks have been very quick to move,” said Young. Although, “you can't blame them”, he conceded.
Australia's housing shortage puts a floor under how far prices can fall, but Young believes the correction is only about two-thirds done, with prices likely to slip by at least another 5%.
Read more: Should Australia brace for an AI-powered housing shortage?
Not everyone is unhappy about falling prices: a recent survey found most Australians now support falling house prices.
Petrol, government spending and a different kind of inflation
Young singled out fuel costs as the pressure that has refused to fade.
"It just seems to be grinding away and we are seeing people therefore having to adjust for this big import of energy into their pricing. And I just don't see that going away and it's going to be a driver of inflation for some months yet," he said.
Young rejected comparisons with the last time rates were this high. Under the Howard government, rates rose to cool a private-sector mining boom while the budget ran in the black. "The reason (rates) were high back there is we had a mining boom," Young explained. "We also had a government that was running surpluses. We were actually in ripper shape. This time around, the spending… is about government spending. It's been all about infrastructure."
Young expects that infrastructure pipeline to wind down, particularly in Victoria, and immigration to slow as both major parties bow to political pressure in the shape of a reinvigorated One Nation party.
While skirting the political argument at stake, Young stressed that immigration is a net positive for the country. “And having all of the political parties saying that we're going to turn immigration down means that we've got that deflating effect coming through, which is again not good for the economy."
That leaves a private sector losing momentum and inflation that still needs higher rates to subdue. "So I'm not overly optimistic because I don't see a lot of good news that can quickly turn this around except for perhaps Iran declaring peace, which could happen tomorrow, but probably won’t.”
Why private credit is the risk to watch
Young is one of a growing number of industry experts warning of the mounting risks in private credit.
Recent reports of Metrics Credit Partners freezing withdrawals from two wholesale funds holding more than $9 billion has amplified alarm bells over the $200 billion industry (of which 40-60% comprises real estate credit)
Although it was the high-profile collapse of Western Sydney developer Bathla in August, which owed roughly $3.4 billion to more than 40 lenders, that became the sector's defining case study.
Regulators have ramped up the rhetoric. "We are now well beyond warnings," Australian Securities and Investments Commission (ASIC) commissioner Simone Constant told a broker summit in September. Reserve Bank of Australia governor Michele Bullock also told a parliamentary inquiry that a serious blow-up in private credit would spill over onto the banks.
"You know, we could see private credit completely implode,” warned Young. “I don't think we will, but that's the other smoking gun that hasn't properly gone off yet, but it's certainly smoking.”
Why mortgage brokers are well placed
Young's broader outlook for the channel is brighter. Broker share of new home lending keeps climbing, which he says will cushion the expected fall in volumes.
Brokers settled a record 81.6% of new residential home loans in the June 2026 quarter, according to Mortgage & Finance Association of Australia (MFAA) data compiled by Cotality.
"It's times like this that are actually really good for the industry because people actually really appreciate having someone to talk to," Young said. "The banks aren't well set up for this, (but) the mortgage broking industry is so well set up for this."
His advice for the months ahead is simple: pick up the phone and reach out to your clients. "People, when they're depressed, when things go wrong, they actually remember that phone call. So this is one of those times when you really should be ringing, you really should be making contact.”
In short, the brokers who go the extra mile amid these challenging times are the ones that will pull through.
