Australia Property Tax Reforms Already Hitting Housing Market, Experts Warn
Synopsis
Australia’s proposed property tax reforms are already affecting the housing market, according to leading analysts and economists. SQM Research data showed falling asking prices across several major cities, while Sydney auction clearance rates and open home attendance have also weakened. Experts say uncertainty around negative gearing changes, rising interest rates, and weaker consumer confidence are reducing buyer demand. SQM Research’s Louis Christopher warned Sydney home prices could potentially fall up to 10%, while Ray White economist Nerida Conisbee said slower market activity could also impact sellers and state government stamp duty revenue in coming months.
Australia’s housing market is already feeling the pinch of proposed changes to negative gearing and capital gains tax reforms, with analysts warning a falling buyer demand.
Key Highlights
- Some experts say reforms in property taxes are already being felt on the housing demand front
- SQM Research says Sydney asking prices fell 2% over the quarter
- Sydney home prices could fall as much as 10%
- Auction clearance rates and open home attendance remain subdued
- Investors reportedly borrowing less after budget changes, banks tighten guidance
Sydney house prices under pressure as fears over tax reform persist
Property analysts believe Australia’s housing market is already responding to the federal government’s planned property tax reforms, before they have even been introduced. The Albanese government is moving to abolish negative gearing advantages over investing in established homes and re-design the 50% capital gains tax discount with a lower framework linked to inflation.
Louis Christopher, SQM Research managing director, said Sydney asking prices have been deteriorating since February with declines in house values more pronounced than for units. SQM data to 19 May found asking prices in Sydney fell by 0.7% over the month and by 2% through the quarter, with other capital markets such as Melbourne, Brisbane, Adelaide Perth and Canberra also posting falls in the monthly figures.
Demand Slumps, Rates Rise And The Market Is Shaky For Buyers
Experts say the slowdown in housing led to rising interest rates, lower consumer sentiment, uncertainty from tensions in the Middle East and ambiguities around Labour tax reform plans. The policy changes could have the same effect on Sydney prices as another 1.5% interest rate hike and may even push them closer to a more than 9 or 10% decline, Mr Christopher said.
Property tracker Cotality similarly blames price declines in Sydney and Melbourne for May month-on-month, with Sydney auction clearance rates at a near two-year low of 31.1%. Open home attendance simultaneously plummeted across the capital cities, with just 1.9 people turning up per inspection in Sydney compared to 3.5 a year ago.
Economists say slower price growth could hurt market activity.
Lower price growth may not be bad for heated property markets like Perth, Brisbane and Adelaide but fewer housing transactions will lessen stamp duty revenue for state governments, said Nerida Coinsbee, Red White chief executive. Mr Christopher also asked if first home buyers were ever going to perform better, if prices stagnant, and claimed any new buy a decrease could result in many having recently purchased under low-deposit government schemes already being in negative equity.
FAQs
- What changes are being proposed by the government?
Government plans to remove negative gearing in existing properties and to cut capital gains tax discount as well.
- How far could Sydney house prices crash?
SQM Research pointed out prices in Sydney could fall by 9 or 10 per cent.
- Are property prices already falling?
Yes. The asking prices and the auction clearance rates are showing as weaker across several cities
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