Experts say property tax reforms already significantly impacting housing market
Analysts warn Australia’s upcoming property tax reforms—including scrapping negative gearing and the 50% capital gains discount—are already causing Sydney house prices to decline, with predictions of a 10% drop. SQM Research reports asking prices fell in most capital cities, while banks adjust loan criteria, reducing borrowing capacity for investors by 10-20% despite grandfathering protections for existing owners.
Australia’s proposed property tax reforms are already impacting the housing market before implementation, with analysts warning of significant price declines. SQM Research head Louis Christopher noted Sydney asking prices fell 0.7% in May and 2% over the quarter, while Melbourne and Brisbane also saw drops. The federal government’s changes—removing negative gearing and the 50% capital gains discount—are expected to slow price growth by 2%, though Christopher predicts a sharper 6-9% fall in Sydney and Melbourne by year-end. Christopher attributed the decline to investor uncertainty, with banks tightening lending criteria. Data shows loan capacity for investors could shrink by 10-20%, despite grandfathering protections for pre-budget property owners. The reforms aim to boost first-home buyer access but have triggered market caution, with Sydney prices peaking in February before a steady decline. Prime Minister Anthony Albanese and Treasurer Jim Chalmers framed the reforms as necessary for intergenerational equity, though critics argue the timing worsens economic strain. Treasury forecasts a 2% slowdown in price growth, but Christopher’s revised outlook suggests deeper losses, comparing the reforms’ impact to an additional 1.5% interest rate hike. Property tracker Cotality confirmed price drops in Sydney (-0.5%) and Melbourne (-0.5%) for May, while Adelaide (-0.4%) and Perth (+1.2%) showed mixed trends. Hobart and Darwin were the only cities with slight price increases. Christopher cautioned against expecting a market rebound soon, describing the outlook as ‘weak’ with no immediate signs of stabilization.
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