Minister denies housing price slump is being driven by property tax changes

Clare O'Neil says the property market is in a "correction". (ABC News: Ian Cutmore ) Federal Housing Minister Clare O'Neil has acknowledged the property market is experiencing a correction after auction clearance rates dropped below 50 per cent last week. She says the dip in house prices is being driven by a range of factors, not just the market's reaction to proposed changes to negative gearing and the capital gains tax. Major lenders have revised down their forecasts for growth, with some expecting it to flatline this year. Link copiedShareShare articleHousing Minister Clare O'Neil has acknowledged the property market is undergoing a correction, but insists the government's proposed changes to negative gearing and capital gains tax are not the sole cause. Auction clearance rates nationally fell below 50 per cent last week, their lowest level since the start of the COVID-19 pandemic, while house prices recorded their sharpest declines in Sydney and Melbourne. Speaking on Wednesday, Ms O'Neil said the tax reforms would influence housing market outcomes but rejected suggestions they were the primary driver. "The housing market's cyclical in Australia, a very uncontroversial comment," she told the ABC. "We see periods of very significant house price growth and then we see the market make a correction, and that's what we're seeing at the moment." Politicians have been hesitant to say whether prices should rise or fall, as both sides of politics feel the pressure of trying to appease voters who own and voters who are trying to buy. The minister pointed to a pre-existing downward trend in major housing markets and described current conditions as a "correction" after years of extraordinary growth. "We've just been through what has been extremely high house price growth in the period from COVID, basically before COVID to today," she said. "House prices have gone up just in that time by more than 50 per cent and we are seeing a correction on that." A correction in market terms is considered a drop of 10 per cent, although Ms O'Neil's office said the minister was speaking in a broad sense to describe what public data showed was a drop in prices. The government’s tax overhaul aims to make it easier for first-home buyers to compete in the housing market by removing tax advantages that mainly benefit property investors. The changes limit negative gearing tax deductions on investment property losses to new properties, while protecting the concessions for property already owned. The government is also removing the 50 per cent capital gains tax discount on profits made on future asset sales, replacing it with an inflation-based discount. Treasury modelling estimated 75,000 properties would be sold to first-home buyers which would have otherwise gone to investors if the changes were legislated. Despite the government's efforts to improve affordability, Ms O'Neil conceded that Australians were unlikely to notice a significant improvement in housing affordability before the next federal election. On budget night, the government painted an optimistic picture of the impact the tax changes would have on property values, forecasting continued growth, albeit at a slower pace. Treasury modelling projected that price growth would slow by 2 per cent, although it did not specify over what period other than "medium-term". But in the weeks after the budget, the Commonwealth Bank revised down forecasts, with economists anticipating house prices would remain largely flat this year. The bank's original prediction just after the policies were announced was for a growth of 3 per cent. Anthony Albanese has been careful not to ostracise Australians who already own property. (ABC News: Ian Cutmore) The prime minister and other senior Labor figures had been careful to frame the dip in property values as a normalisation of prices, with politicians from all sides conscious of the need to appeal to first-home buyers and property owners. Earlier this month, Anthony Albanese said the government was "rebalancing the system" so that investment decisions were driven by "economic reasons, not tax outcomes". Treasurer Jim Chalmers said the tax changes were not aimed at "a particular price outcome" but instead gave Australians trying to enter the market a "fair crack". This morning, Social Services Minister Tanya Plibersek urged people to "take a deep breath". "I think the fact that weekend clearance rates are a bit down at the moment, I think that's just a feature of the instability we're seeing globally and what's happening with interest rates," she said. The Opposition had also struggled to articulate a goal for house prices, with leader Angus Taylor saying he wanted to see housing become "affordable again" and Shadow Treasurer Tim Wilson advocating for "market prices be at the market rate". It is still possible for the 2 per cent growth forecast to be achieved in the housing market in the medium term. Economists at Commo

Minister denies housing price slump is being driven by property tax changes

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