Will the 'most significant tax changes' in decades fix the housing crisis? | The Business | ABC NEWS

Added: 2026-05-12

[00:00:00]So basically what we think it will shift the pressure from pricing to rents.

[00:00:08]Joining me now at Nerida Conisbee from Ray White Real Estate Group, their chief economist, and Brad Arnold from the Housing Industry Association.

[00:00:17]Nerida, first up, what do you think the effect on prices will be from these tax changes?

[00:00:23]It'll definitely slow down price growth, primarily because we we will see a drawback in investor activity, but because we're seeing a drawback in investor activity, it is likely to lead to a fewer rental properties.

[00:00:34]And so basically what we think it will shift the pressure from pricing to rents, and rents will accelerate at a faster rate than prices. So if you had to put a number on it, what kind of price decline do you think we might see as a result of these changes compared to what we would see otherwise? Treasury estimated 2%, do you think that's in the ballpark? Yeah, look at it it's it's very hard to tell. I mean, if you've got markets like Perth sitting at 25%, you've got markets like Melbourne sitting at around 4%. Uh there's definitely a a floor at which as to how much prices can fall, primarily because construction costs are so high at the moment. So replacement costs for buildings is or for houses is very high, and so that will keep pricing elevated long-term. And on the rental front, the government estimated that it might impact rents by $2 a week for a typically priced rental property. Do you again think that's in the ballpark or would you expect a bigger bigger effect?

[00:01:28]Look, it does depend. I mean, look at places like Victoria. Um we've very clearly seen that um higher taxes on investors has discouraged investors. In 1 year, we saw a loss of 20,000 investment proper or 20,000 rental properties in that market.

[00:01:42]Uh we did see rents um moving at double the pace of of what we saw um prices. So uh at this point it is it is difficult to tell, but um you know, we do think there'll be a a fairly immediate impact on on what happens to rentals. And Brad, obviously rents are really driven by supply and demand and from the housing sector supply is a key issue the government's trying to boost. What effect do you think the budget will have on boosting supply? Well, it's a bit of a mixed bag, Michael. On the one hand, there is an additional $2 billion for last mile infrastructure and 500 million of that is set aside for regional regional Australia. So, that's positive.

[00:02:23]On the negative side, we have changes to negative gearing and capital gains tax and the budget papers themselves earmarked that we're projected to build 35,000 less homes over the next decade due to those changes. Now, in a housing crisis, any measure that will reduce the amount of homes we build is is not a really good thing to do for overall supply. The government did say in those same treasury papers that the supply measures, the $2 billion infrastructure fund announced, would boost housing supply by 65,000. So, they're claiming a net gain of 30,000 homes. Do you think that's realistic based on what you've seen in the budget?

[00:03:04]Well, it really depends on on how the infrastructure money gets to where it needs to go. We need to make sure that there aren't barriers to it getting to those local councils that need and the infrastructure gets put on put in place. But, I guess our question would be why now? Why in a housing crisis would you do anything that has a negative impact on investor activity and investors entering the market right now? So, obviously the the government has grandfathered the changes to negative gearing for existing investors. Likewise, the capital gains tax changes don't come in and are prospective from July 1, 2027.

[00:03:43]Do you think that does enough to safeguard investors in the market or do you expect to see some exit?

[00:03:50]It it we will definitely safeguard rental properties. I mean, if we if we did remove if they did remove negative gearing on people that were already negative gearing, we would have seen a run on sales. And so, people getting out of the market quite quickly.

[00:04:02]>> And a much bigger price fall. And a much bigger Well, bigger price fall, but a a much bigger jump in rental prices as well. So, I think on one hand, they did have to grandfather it, but I think then coming back to intergenerational issues, I think a lot of younger people would perhaps be thinking that on one hand, uh you know, we're we're seeing all these changes coming through, but then on the other hand, there are older Australians who are taking advantage of negative gearing, and it's not something that they'll be able to take advantage of.

[00:04:29]>> So, in effect, the drawbridge has been pulled up. Yeah, absolutely. Um in terms of that though, if we did see investors sell, presumably they would be selling to either other investors or prospective owner-occupiers, and the government is claiming that there could be 75,000 extra homeowners and an increase in the home ownership rate due to these policies. Do you buy it? Well, I mean, potentially, but I think um there's a bit of a misconception around someone, you know, we we have a first of someone who's renting, they become a first home buyer, and suddenly you've you've ticked the solved the problem, and and everything's, you know, sorted out. Uh the reality though is that we do have a flow of people coming through, and um and people rent because they leave home, they rent because they have a marriage breakdown. Um and also, they they rent because they're moving in into a city, and you know, labor mobility is so important to you know, for for rental markets, and it's important to have really well-functioning rental markets for labor mobility. So, all of these things start to become challenging longer term if we don't have enough rental properties available. Now, in terms of creating more rental properties, again, the government's claiming this will tend to boost apartment supply. Um do you see any other positives in this budget for the construction sector? Well, there was a a small win for for small businesses and um builders and and tradies, and that is the free Australian standards.

[00:05:50]In the budget papers it's around $1,600 a year saving for those businesses, but more importantly it'll help to improve compliance as well.

[00:05:59]Well, the housing industry crisis and the house price crisis in Australia has been nearly three decades in the making, so it's a bit much to expect it to be solved in one budget. Thank you both for joining us.