STEPHEN JOHNSON: Why Labor’s changes to negative gearing and CGT won’t make housing affordable for the young

For once, a Federal Cabinet minister has shown some candour, at least when it comes to bricks and mortar, by admitting that depriving future landlords of generous tax breaks is not about making housing more affordable for younger Australians.

Housing Minister Clare O’Neil on Wednesday declared Labor’s plan to permanently scrap negative gearing for existing homes, bought after Budget night, from July 2027 and introduce a new 30 per cent capital gains tax on investment properties would only have a modest effect on real estate values.

“This will have a modest affordability effect on house prices in Australia, but at the end of the day, the thing that is driving house prices is actually not our tax settings,” she told ABC TV’s New Breakfast program.

“It’s a fundamental mismatch between how many homes we’re building and how many homes we need.

“These changes are difficult, but incredibly important for addressing the housing challenges the country faces.”

There you have it: Labor’s tax policies on housing weren’t designed to make housing more affordable for younger generations in a nation where the average, full-time salary of $107,000 no longer buys the typical house with a seven-figure median-price tag in Brisbane, Adelaide or Perth, not to mention Sydney, the world’s second most unaffordable housing market.

The Labor minister from Melbourne — now one of Australia’s more affordable housing markets — was interviewed after the Westpac bank forecast dwelling values in the Victorian capital would fall by 4 per cent in 2026 as a result of the tax changes but would still increase by 5 per cent in 2027.

Sydney, another big city receiving a sizeable influx of overseas migrants, was expected to see a 3 per cent decline in a market where $1.6 million is the middle house price. But a 2 per cent increase was still expected next year.

The cities receiving big influx of interstate migration were still predicted to see property values grow at more than double the 3.3 per cent wage price index.

Brisbane was still tipped to see 9 per cent growth in 2026, a slowdown from last year’s already hot 14.7 per cent increase, in a city where $1.2m is now the mid-point price for a home with a backyard.

Growth in the Queensland capital was tipped to slow next year to a more modest 3 per cent.

Perth, Australia’s fastest-growing city, was still tipped to see 13 per cent growth this year, down only slightly compared with last year’s phenomenal 16.7 per cent increase, before slowing to a still-strong 5 per cent next year.

Adelaide, despite not receiving strong population growth, was expected to see a 7 per cent growth pace in 2026, down from last year’s 8.3 per cent rise, followed by a 4 per cent uptick in 2027.

While Sydney and Melbourne are tipped to decline, the big gains in Brisbane, Perth and Adelaide were still expected to see capital city prices rise by 1 per cent this year, followed by 3 per cent next year.

After all the hoo-ha about Labor tackling intergenerational inequality, the median capital city house would still cost $1.1 million by Christmas, even though property investors buying an existing home would lose access to negative gearing from July next year.

Since the 50 per cent capital gains tax discount debuted in 1999, house prices increases have consistently outpaced wages, with the exception of Melbourne after the pandemic.

Replacing that concession with a minimum 30 per cent capital gains tax on real, inflation-adjusted gains — to more closely match the marginal income tax rate for those earning $45,000 to $130,000 — is hardly expected to induce a property market decline.

With 245,000 migrants still forecast to flood into Australia during the next financial year, any downturn is likely to be followed by an upswing anyway, if recent Cotality property price data is any guide.

House and apartment values soared by 8.1 per cent in 2023, even though the Reserve Bank raised rates that year for the 13th time in 18 months.

Back then, a record 548,800 migrants moved to Australia on a permanent and long-term basis, underpinning demand for somewhere to live.

That reversed a 4.9 per cent decline in 2022, when inflation soared to the highest level in 32 years following the end of COVID lockdowns and a surge in petrol prices after Russia invaded Ukraine.

With two-thirds of Australians either owning their home outright or paying off a mortgage, no Australian government wanting to get re-elected would be willing to allow house prices to keep on falling, despite Labor claiming to be the champions of youth.

So much for Treasurer Jim Chalmers talking up “intergenerational fairness” ahead of the Budget.