Treasurer Jim Chalmers says Budget alone not responsible for huge slump in home prices

Treasurer Jim Chalmers is vowing that Australian house prices will continue to grow but at a slower pace despite home values plunging at the steepest pace in almost four years, sparking negative equity concerns.

Across Australia, house and unit values in July fell by 0.7 per cent, marking the biggest monthly drop since December 2022 during the Reserve Bank’s last aggressive rate rise cycle, new Cotality data showed.

National dwelling values have been falling for four straight months, and a sustained downturn as a result of higher interest rates and new taxes on investment properties could see the steepest fall since 2019, when the banking regulator cracked down on interest-only loans.

Sydney house prices dived by 1.7 per cent while in Melbourne, now a more affordable market, they last month fell by 1.2 per cent.

Property values in Australia’s two biggest cities have been consistently falling since February, when the Reserve Bank embarked on the first of three rate hikes.

Brisbane prices fell by 0.6 per cent in July, following June’s drop which marked the first monthly decline since January 2023, after more than three years of uninterrupted growth.

Adelaide house prices also went backwards for the second straight month while in Perth, house prices rose by just 0.1 per cent in July, just three months after recording a 2.1 per cent monthly increase.

House prices are now falling in four of Australia’s six state capital city markets, two months after the May Budget announced an end to negative gearing for existing homes from July 2027 and the replacement of the 50 per cent capital gains tax discount on investment properties with a new minimum 30 per cent tax.

“Well, the Budget assumptions were that over the course of the next couple of years we will see prices continue to grow, but a bit more modestly than they have been,” Dr Chalmers told ABC Radio National on Monday.

“And obviously this is only the first couple of months of that two-year period. But we also need to maintain a sense of perspective in other ways as well.

“Housing is a long-term investment, and we continue to expect over the course of the coming years that prices will continue to rise, but more modestly than before.”

With many voters worried about falling home values, the Treasurer suggested the Reserve Bank of Australia’s three rate rises in 2026, so far, were more to blame than just the Budget, citing the Cotality summary.

“You know, they specifically identified, for example, interest rate movements earlier this year, higher fuel costs that we’ve been talking about, the hit to confidence from the war in the Middle East, as well as changes in the Budget,” he said.

“And, so all of those things together are playing a role here, not just one factor or another.”

Acting Opposition Leader Jane Hume said the Labor Government was responsible for recent borrowers now potentially owing their bank more than their home was worth.

“Certainly, for those people that are trying to sell their home, whether it’s because they have to, it’s because they want to downsize, whether it’s for new homeowners that want to get into the housing market but are concerned that the value of their new home is going to push them into negative equity within months of them buying a new home, this is a disaster of Labor’s making,” she told News24 on Monday.

“I wonder whether this was an intentional or an unintentional consequence of Labor’s housing taxes.

“Because let’s face it, it wasn’t something that they gave us a heads up on last May when they introduced these changes, these changes that were based on a lie in their Budget.”

Former Liberal treasurer Joe Hockey, who himself delivered an unpopular Budget in 2014, declared the tax changes for investors made this the “worst Budget in history”.

“I’m happy to say it’s the worst Budget, you know, because I had that title previously,” he told a Diggers and Dealers mining investment forum in Kalgoorlie on Monday.

“Capital gains tax is a disaster, their changes — stupid.”

Cotality head of research Gerard Burg noted the downturn had now spread beyond Sydney and Melbourne to Brisbane and Adelaide, which were “previously robust mid-sized markets”.

AMP chief economist Shane Oliver said the return of cost-of-living pressures had turned off potential buyers.

“The weakening in the property market has been accelerating since late last year reflecting a combination of rate hikes, the Budget tax hikes on investors, poor affordability and depressed buyer confidence,” he said.

National house and unit prices fell by 0.7 per cent in July to $928,421 but in the capital cities, the decline was ever steeper at 0.9 per cent, taking the median price to $1.011 million with prices peaking during the month of the May Budget in Brisbane, Adelaide and Perth.

Sydney, Australia’s most expensive market, suffered the biggest monthly drop of 1.7 per cent, taking the mid-point house price back to $1.529m, in city with a preliminary weekend auction clearance rate of just 49.7 per cent.

Melbourne, Australia’s sixth most expensive capital city market despite being the nation’s second biggest city, saw its median house price fall by another 1.4 per cent in July to $936,528.

Canberra house prices fell by 1.2 per cent over the month to $1.025m.

Brisbane, Australia’s second most expensive market, saw its median house price fall 0.6 per cent to $1.207m.

Adelaide prices fell 0.2 per cent to $1.008m, Perth values increased by just 0.1 per cent to $1.074m.

Darwin is now Australia’s strongest market, with values rising 0.7 per cent to $755,082, while Hobart prices went up by 0.2 per cent to $805,165.