Housing Minister Says Budget Tax Changes Will Have Mild Effect on Prices

The housing minister said Treasury modeling shows the government's proposed changes to negative gearing and capital gains tax will slow house price growth by about 2 per cent in the short term. The minister stated that the changes will have only a mild impact on affordability and that any larger price drop would stem from other factors, primarily interest rates.

Stanley analysts have projected that the measures could reverse home prices because of lower expected returns for investors. Westpac has forecast that a third of new investor activity will fall away and total housing turnover will drop by a fifth. The housing minister said the budget measures are not the main driver of price movements and that Treasury expects only a mild affordability impact.

The minister said the government's broader $47 billion housing package is expected to deliver about 420,000 new homes over the decade. Treasury has also forecast only a minor change to rents. The government has acknowledged the tax changes will reduce investor supply on their own but has said a separate $2 billion infrastructure injection is projected to produce a net increase of about 30,000 homes.

The government is consulting on possible amendments to its capital gains tax reforms. Business groups have asked for the turnover threshold for small-business concessions to rise from $2 million to $10 million. The housing minister said the government is considering those requests and additional adjustments for start-ups.