Capital gains tax: Treasurer Jim Chalmers corrects Clare O’Neil over housing market correction comments

Jim Chalmers has defended the impact of the Budget’s housing measures, urging people not to pass judgement based on six weeks of “volatile” auction and price results.

The Treasurer also had to correct Housing Minister Clare O’Neil’s declaration that Australia was seeing a housing market correction amid dropping auction clearance rates — saying his Cabinet colleague was speaking in a general rather than technical sense.

Auction clearance rates across the country dropped to their lowest since the early days of COVID lockdowns last weekend, and nearly a quarter of homes scheduled for auction were withdrawn, according to Cotality data. The number of homes put under the hammer nationally dropped by more than 10 per cent compared to the previous week.

Median house prices in Sydney and Melbourne have fallen since December, although prices in other capital cities, including Perth, continue to grow.

Ms O’Neil said all of this pointed to a changing market.

“I think the housing market’s cyclical in Australia, a very uncontroversial comment. 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,” she told Radio National.

Dr Chalmers walked back this description when asked later whether he thought housing was facing a price drop of some 10 per cent — the technical definition of a “market correction” in the stock market.

“I think the Housing Minister was using a general description rather than a technical definition,” he said.

“We have seen a softening in house prices in recent months even before the Budget, and that’s a reflection of a whole range of factors including changes in interest rates, softness in the broader global and domestic economies, as well as any other influences from the Budget and the like.”

He wouldn’t offer advice to sellers on setting their price expectations amid the falling auction rates, saying those were “quite personal transactions”, and pointing to volatility in clearance rates.

“But housing investments are longer-term investments and I’d caution people against making longer-term conclusions from six weekends or so of data,” he said.

Ms O’Neil was pushed during Question Time on whether she or Dr Chalmers had it right.

“They don’t like to hear the reality of what they’ve done to themselves, and that is, Speaker, that they are the last people in this country standing who can’t see that this housing market is broken,” she replied before going on to say Angus Taylor was clearly going to have “an inauspicious and short leadership”.

Cabinet colleague Tanya Plibersek said house prices “have to grow more slowly” because there were too many young Australians locked out of the market.

“I’ve got three kids. A lot of people my age would stop me on the street on the weekend when I’m out there doing street stalls in my electorate and say, ‘What are you going to do for the young people? My kids, my grandkids can’t afford a home of their own’,” she told Nine.

Shadow treasurer Tim Wilson accused the Government of being in “complete disarray” and not knowing what its policy objective was.

“What we need is Australians to be able to get into the housing market, to rent on the private market, or to buy their first home so they can get ahead,” he said.

“Instead, the Albanese Government’s solution is simply to crash confidence, inflate out wages and make it harder for Australians to save for a first-home deposit and, if they do, to tax them harder.”

The Coalition tried to pressure Mr Albanese during Question Time over his own history of property sales after a report in News.com.au that he would have had to pay $200,000 more in taxes had the new capital gains tax discount arrangements been in place.

“Given the Prime Minister’s investment success, can he explain why it’s fair for him to make $200,000 and then pull up this ladder of opportunity for millions of aspirational Australians?” Nationals MP Alison Penfold asked.

Mr Albanese said he wanted young people to have the same opportunities to buy a home as he did.

“I didn’t inherit wealth. What I did was work hard … save for a deposit and buy my own home,” he said

“All of my arrangements have been declared appropriately.”

Inflation data released on Wednesday showed the cost of building a new home was increasing faster than other costs, which will complicate the picture for house prices.

The cost of new dwellings rose 5.6 per cent in the 12 months to May, according to the Australian Bureau of Statistics, well above the overall inflation rate of 4 per cent.

Dr Chalmers said that reflected the broadening impact of the war in the Middle East and the closure of the Strait of Hormuz, and was putting pressure on the economy.

But he denied the government’s bid to build 1.2 million homes by mid-2029 was inflationary given these extra costs and workforce pressures.

“The housing market is obviously a key focus of the Government that begins with supply, and that supply challenge has got a range of elements, including making sure that we have the builders that we need and that’s why we are investing so substantially in Free TAFE and in incentives for apprentices,” he said.

A $2 billion infrastructure fund included in the May Budget is expected to lead to the building of 65,000 new homes — although this is partially offset by the dampening effect of changes to capital gains tax discounts and negative gearing that are set to pass Parliament on Thursday.

The Government believes the biggest impact from its supply measures will come from its $10 billion 100,000 homes for first-home buyers scheme, which is expected to lead to the construction of 300,000 houses, a third of which will be reserve for first-time purchasers.