Economists Have Different Opinions on How Much the Budget Will Affect Property Prices

In short:

Economists are not sure how much the budget changes will affect property prices, with some saying prices might fall by up to 5 percent.

The tax changes include how capital gains are taxed and negative gearing for new homes.

What's next?

AMP economists think there will still be a lack of housing, while CBA thinks the budget measures will be neutral or slightly positive for housing supply.

Some well-known economists think the budget might be underestimating how much the changes will affect property prices.

The government used the 2026 budget to reduce tax breaks for investing in existing properties.

The tax changes include how capital gains are taxed and limiting negative gearing to new homes.

For the latest budget news, read our blog.

NAB economists said the changes to taxation for housing are very significant.

The government's changes to investment tax breaks are the biggest in decades.

Treasurer Jim Chalmers said the changes will help workers and first home buyers and support investment in new housing.

The budget forecast says housing price growth will slow by 2 percent over two years.

Matthew Bowes from the Grattan Institute said the government's forecasts are similar to the think tank's and the changes will likely reduce house prices by 1 percent.

He noted that existing investors will keep most of their tax benefits, which will limit the impact.

Matthew Bowes said the government's forecasts of house price impacts are similar to the Grattan Institute's.

Will home prices fall or just slow down?

Economists agree that the changes could reduce the rapid growth in house prices.

Matthew Bowes said home ownership will likely increase as homebuyers can outbid investors at auctions.

Commonwealth Bank senior economist Trent Saunders said the impact will be modest this year.

The budget measures will make existing property less attractive to investors and slow price growth.

In response to the policy changes, house prices are expected to be 3 percent lower than they would have been.

The transition will be slow, with 0.6 percentage points subtracted from annual price growth by the end of this year.

The changes were announced when home price growth was already slowing down.

The budget explained

Topic: Federal Government

Topic: Explainer

Analysis by Annabel Crabb

Analysis by Ian Verrender

CBA has forecast dwelling prices to grow 3 percent over the year to December, down from a previous forecast of 5 percent.

It has left its forecast for property price growth for the year to December 2027 unchanged at 3 percent.

Mr Saunders acknowledged the risk of a bigger fallout.

A key risk is that there is a larger short-term response of house prices due to the effect of these policy changes on sentiment.

If this occurred, price growth could ease by more than expected based on fundamentals in the short term.

AMP chief economist Shane Oliver forecast that house prices could fall by up to 5 percent in the near term.

But it's doubtful that the moves will boost housing affordability much over the longer term.

'Muted' rent increases expected

Shadow Treasurer Tim Wilson said the opposition would not support the changes.

The government forecast only a small increase in rental prices, estimating less than $2 a week for the standard renter.

The Grattan Institute's modelling showed a similar forecast to the government.

He added that while there would be fewer investors in the property market, rent prices would not be meaningfully pushed up.

CBA's Mr Saunders agreed, saying that the impact on rents will likely be 'muted'.

Economists divided on effects on supply

Supply is still the main game, the treasurer told 7.30 on budget night.

But Mr Chalmers also said that a focus on supply was simply not enough to address the housing crisis on its own.

Dr Oliver has forecast an ongoing undersupply of housing.

He said limiting negative gearing to just new homes would likely have the unintended consequence of pricing out first home buyers from new builds.

Dr Oliver pointed to the government's own estimates that the new changes will likely result in 35,000 fewer homes being built.

There's no doubt that taking away negative gearing on existing properties will even the playing field but they aren't a cure all.

Commonwealth Bank economists were somewhat more optimistic about the potential ramifications for housing supply.

The impact on construction activity is ambiguous, though we expect the combined effect of all policies is neutral to slightly positive for supply.

The net effect will depend on whether the incentive to buy new dwellings is strong enough to offset the broader reduction in investor demand for housing.

The Grattan Institute, meanwhile, has noted that overly restrictive state laws continue to hamper efforts to increase supply.

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Economists Have Different Opinions on How Much the Budget Will Affect Property Prices

In short:

Economists are not sure how much the budget changes will affect property prices, with some saying prices might fall by up to 5 percent.

The tax changes include how capital gains are taxed and negative gearing for new homes.

What's next?

AMP economists think there will still be a lack of housing, while CBA thinks the budget measures will be neutral or slightly positive for housing supply.

Some well-known economists think the budget might be underestimating how much the changes will affect property prices.

The government used the 2026 budget to reduce tax breaks for investing in existing properties.

The tax changes include how capital gains are taxed and limiting negative gearing to new homes.

For the latest budget news, read our blog.

NAB economists said the changes to taxation for housing are very significant.

The government's changes to investment tax breaks are the biggest in decades.

Treasurer Jim Chalmers said the changes will help workers and first home buyers and support investment in new housing.

The budget forecast says housing price growth will slow by 2 percent over two years.

Matthew Bowes from the Grattan Institute said the government's forecasts are similar to the think tank's and the changes will likely reduce house prices by 1 percent.

He noted that existing investors will keep most of their tax benefits, which will limit the impact.

Matthew Bowes said the government's forecasts of house price impacts are similar to the Grattan Institute's.

Will home prices fall or just slow down?

Economists agree that the changes could reduce the rapid growth in house prices.

Matthew Bowes said home ownership will likely increase as homebuyers can outbid investors at auctions.

Commonwealth Bank senior economist Trent Saunders said the impact will be modest this year.

The budget measures will make existing property less attractive to investors and slow price growth.

In response to the policy changes, house prices are expected to be 3 percent lower than they would have been.

The transition will be slow, with 0.6 percentage points subtracted from annual price growth by the end of this year.

The changes were announced when home price growth was already slowing down.

The budget explained

Topic: Federal Government

Topic: Explainer

Analysis by Annabel Crabb

Analysis by Ian Verrender

CBA has forecast dwelling prices to grow 3 percent over the year to December, down from a previous forecast of 5 percent.

It has left its forecast for property price growth for the year to December 2027 unchanged at 3 percent.

Mr Saunders acknowledged the risk of a bigger fallout.

A key risk is that there is a larger short-term response of house prices due to the effect of these policy changes on sentiment.

If this occurred, price growth could ease by more than expected based on fundamentals in the short term.

AMP chief economist Shane Oliver forecast that house prices could fall by up to 5 percent in the near term.

But it's doubtful that the moves will boost housing affordability much over the longer term.

'Muted' rent increases expected

Shadow Treasurer Tim Wilson said the opposition would not support the changes.

The government forecast only a small increase in rental prices, estimating less than $2 a week for the standard renter.

The Grattan Institute's modelling showed a similar forecast to the government.

He added that while there would be fewer investors in the property market, rent prices would not be meaningfully pushed up.

CBA's Mr Saunders agreed, saying that the impact on rents will likely be 'muted'.

Economists divided on effects on supply

Supply is still the main game, the treasurer told 7.30 on budget night.

But Mr Chalmers also said that a focus on supply was simply not enough to address the housing crisis on its own.

Dr Oliver has forecast an ongoing undersupply of housing.

He said limiting negative gearing to just new homes would likely have the unintended consequence of pricing out first home buyers from new builds.

Dr Oliver pointed to the government's own estimates that the new changes will likely result in 35,000 fewer homes being built.

There's no doubt that taking away negative gearing on existing properties will even the playing field but they aren't a cure all.

Commonwealth Bank economists were somewhat more optimistic about the potential ramifications for housing supply.

The impact on construction activity is ambiguous, though we expect the combined effect of all policies is neutral to slightly positive for supply.

The net effect will depend on whether the incentive to buy new dwellings is strong enough to offset the broader reduction in investor demand for housing.

The Grattan Institute, meanwhile, has noted that overly restrictive state laws continue to hamper efforts to increase supply.

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Topic: Consumer Confidence

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Analysis by David Speers

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