Alan Kohler has warned the popularity of AI could see more data centres built in major cities – which will further strain the housing supply.

Kohler made the offhand prediction in a column for ABC News on Monday morning, as he was explaining apparent drops in national property value due to the current market correction weren’t as big as many were warning.

The journalist pointed to recent headlines about a $230billion decrease in the value of homes around Australia in July, but said that, because the market is so large, it only represented an actual drop of 1.8 per cent from $12.77trillion to $12.54trillion.

The national median value of homes has actually risen 35 per cent from the low point of February 2023, even after several interest rate hikes and cuts.

Even if house prices in Sydney and Melbourne dropped by 10 per cent, as NAB has forecast, Kohler pointed out the price of homes would still be high. 

But amid the forecasts being made for the property market, Mr Kohler urged Australians with a stake in the property game to consider one upcoming problem: data centres.

‘The arrival of AI has dramatically increased the need for more ‘compute’, or computer processing capacity, produced in factories known as data centres,’ he said.

‘The amount of computing used in an AI query is potentially 10 times higher than the now–redundant Google search, partly because it usually results in a dialogue rather than simply a list of links, but also because you can do far more with AI – such as create videos and photos and write software code.’

Alan Kohler (above) warned property prices are unlikely to, meaningfully, lower and high interest rates will stay in place

While AI is encroaching on the workforce, Kohler pointed to the high number of data centres being built in major cities for straining property supply and increasing government spending

A newly-built data centre on Indwe Street in West Footscray, Melbourne where residents are complaining about the size and noise produced from the facility

Sydney is currently Australia’s leading market for data centres, has one of the lowest residential vacancy rates in the country, and is the country’s most populous city.

Data from RenewMap found 88 data centre projects in the city, 46 operating and 42 in the pipeline.

It described the Western Sydney corridor, centred around areas like Eastern Creek and Kemps Creek, as ‘one of the most active data centre precincts in the Asia–Pacific region’.

But the centres exist all over the city, with eight in the CBD alone. Their footprint is vast, the amount of electricity and water they use is immense, and for homeowners who live nearby the noise can be infuriating.

‘And this is before the next phase of AI takes hold – that is, humanoid robots, also described as ‘physical AI’,’ Kohler said.

‘My X (Twitter) feed at the moment is full of videos of robots expertly doing all sorts of jobs, like mopping the floor, making hotel beds, building a house, laying bricks, kneading bread dough, making furniture and picking tomatoes.

‘I’d say most, if not all, of these are fake – AI videos based on humans doing the work and made to look like robots – but I can’t be sure. 

‘Anyway, it’s early days. It won’t be long before robots can do all those things and more.’

On top of concerns about data centres, Kohler breifly mentioned the incoming prospect of AI robots entering the workforce and replacing hardworking Aussies

Large data centres (like above, in Sydney) take up valuable real estate and increase government spending, driving inflation

While Kohler said it wasn’t the right time for a ‘philosophical discussion’ about job losses from AI, he said the integration of robots into workplaces would likely further increase the need for data centres.

Kohler claimed increased government spending from the data centres, international pressure to up defence funding and ‘historically high government debt’ would likely drive inflation and see interest rates remain high for the foreseeable future.

‘Bottom line: high interest rates are here to stay, which will continue to weigh on house prices,’ he said.

Reserve Bank Governor Michele Bullock and the central bank’s board will meet on Tuesday, with economists forecasting the cash rate to stay at 4.35 per cent.

HSBC chief economist Paul Bloxham said the central bank would likely take a wait-and-see approach before choosing to make a move on the cash rate.

‘That being said, as inflation is still above target, we expect the central bank to continue to express concern that inflation is too high,’ he said.

Mr Bloxham said there was still a chance, if inflation does not fall fast enough, that the Reserve Bank of Australia could still lift rates later in 2026.