Housing policy decisions will now be made in a highly charged fiscal environment, with Federal Treasurer Jim Chalmers set to hand down what is shaping up to be one of Australia’s most consequential federal budgets.
With housing affordability still one of Australia’s most persistent economic challenges, Ray White chief economist Nerida Conisbee (pictured) argues it is being approached through the wrong lens.
Conisbee maintains that the evidence shows affordability is driven by “the ability to deliver housing at scale”, rather than interventions that simply shift demand within the system.”.
Policies that increase purchasing power for first-home buyers in markets where supply is tightly constrained are likely to be capitalised into prices, especially at the lower end where demand is strongest. In practice, that means higher entry prices in the very segments where many households are most stretched. That dynamic can leave first-home buyers and property investors under pressure as they try to maximise borrowing capacity while mortgage rates remain elevated.
The government is weighing changes to the capital gains tax (CGT) discount introduced in 1999, following criticism that it has skewed homeownership towards investors and contributed to intergenerational unfairness in the housing market. While such reforms may aim to improve equity and repair the budget, they risk discouraging property investors if not carefully calibrated.
Conisbee stresses that Australia’s rental market relies heavily on small, private landlords, and warns that “we don’t have a backup system for rental housing”. A sharp fall in investor participation would quickly contract rental supply, making it harder for tenants to find affordable properties.
The Finance Brokers Association of Australia (FBAA) argues that moves to alter the capital gains tax discount and negative gearing to “combat intergenerational inequity” could have exactly that effect. A recent Money.com.au survey found 39% of investors would step back or sell if the 50% CGT discount were reduced, and a further 22% would reconsider their position if negative gearing were capped to one property – meaning 61% may pull back under the proposed reforms.
Conisbee also highlights underutilised housing stock, with many larger homes occupied by smaller households while younger families struggle to access suitable dwellings. She argues that removing tax distortions that discourage downsizing and improving mobility through settings such as superannuation rules would help free up existing homes without relying solely on new builds.
At the same time, she identifies construction capacity and productivity as “one of the key constraints right now”, citing high building costs, labour shortages, and project viability issues. A budget that focuses on expanding building capacity and improving delivery, rather than simply redistributing demand, would be better placed to make meaningful progress on housing affordability.
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