Editorial: Labor is experimenting with your house

Is it too harsh to call Labor’s housing policy a punt?

Maybe. But it is clearly a leap of faith.

Under the guise of seeking “intergenerational equity” by reducing the number of investors in housing, the Budget delivered on May 12 made changes to capital gains tax and negative gearing which had been ruled out before the Government was returned at the election held in May last year.

By Wednesday the evidence clearly indicated the housing market was stalling and prices were on the way down.

In mid-June Westpac said housing investor loan applications had fallen 20 per cent since the Budget.

On Wednesday Australian Bureau of Statistics seasonally adjusted estimates showed total dwelling approvals fell 1.1 per cent in May.

And fresh figures from real estate data group Cotality showed national home values fell 0.4 per cent in June — the steepest monthly decline since 2022.

Since March, after the Reserve Bank raised interest rates for the second time this year, combined capital city house prices have already plunged by 1.3 per cent, led by Sydney and Melbourne.

Cotality is warning of an 8 per cent peak-to-trough plunge in Australian home values by the middle of next year, which would mark one of just three sustained downturns since the early 1980s.

There are also fears that young Australians who used the First Home Buyer Guarantee to buy with just a 5 per cent deposit are exposed to price falls and could be caught with negative equity.

It follows figures last week which showed auction clearance rates across the country had fallen to their lowest since the early days of COVID lockdowns.

But Prime Minister Anthony Albanese, a day after congratulating his MPs for having “won” the Budget debates, celebrated the way the market was going and that first-home buyers going to auction were not bidding against investors.

“The great news is that this Saturday, like last Saturday, first-homebuyers would have rocked up to auctions and not be competing with investors who want to negatively gear their properties and have taxpayers backing in those investments,” he said.

Mr Albanese brushed aside predictions of big house price falls.

“Treasury forecasts aren’t week by week, they’re serious forecasts done based upon modelling and a range of other economic modelling,” he said.

The Government changes would mean “there’ll be increases in the value of houses. It’ll be slightly less, 2 per cent, to be precise, than it would have been otherwise,” Mr Albanese said.

But Opposition Senate leader Michaelia Cash said the Government had undermined market confidence and “turned housing policy into an economic experiment”.

Mr Albanese has nailed his colours to the mast.

He is taking credit for what is unfolding and says it is evidence Labor’s plan is working.

But roughly six million households face seeing their biggest asset losing value.

Liberal deputy leader Jane Hume said many Australians’ futures relied on the equity they had in their home.

If it all ends in tears the person who they will blame for their financial fall is clear.

It will be the Prime Minister.

Responsibility for the editorial comment is taken by WAN Editor-in-Chief Christopher Dore