Markets don’t need to come from a high to fall though. The root of any downturn comes from a shock to the system, whether that shock comes from credit, policy or an external event. Four of the five past downturns (the 2008 GFC crash, the 2013 LVR restrictions, the 2017 investor squeeze, and the 2022 COVID bust) were driven by credit tightening or policy shift, while the 2011 downturn after the Christchurch earthquake was an outlier driven by natural calamity.
What’s pulling sales back today is a mixture of factors that have defined 2026 so tumultuously: a global oil shock pushing up inflation and interest rates, a fragile economy with rising unemployment, and an election threatening change to tax and policy.
None of these three would look sharp enough on its own to explain a downturn. Together, they've been enough to change buyer sentiment and force a pullback, just as the economy needs growth most. Whether this is a momentary pause or the very early stages of a downturn is yet to be seen. With the general election less than two months away, "wait and see" is the strategy most of the market has embraced.