The news that unemployment is set to soar in Australia has gotten me nervous. I still think the property bubble may not pop since the RBA is dropping interest rates, but it all depends on how severe the unemployment will be. We saw what impact a contraction of the finance sector had on the top suburbs. Now that the economic crisis is starting to spread from the finance sector to all other sectors, we may see house prices falling everywhere. Of course, I am not entirely sure if unemployment will be severe enough to cause house prices to fall. My cross-country analysis of house prices tells me that bubbles can be sustained for centuries. (Look at Amsterdam house prices.) Suppose I wanted to hedge against falling house prices in Australia. How do I do it? I obviously cannot short-sell houses. An investment banker friend of mine told me that the best thing to do is to short companies that derive most of their profits from Australian consumers, e.g. Woolworths, but Woolworths sells necessities, so I'm not sure if that will help. What is the best way to profit from falling house prices in Australia, if it does happen?