Home prices tank, but is it a cycle or more long term?
Australia’s housing crisis has deepened after tax cuts for investors sapped already weak buyer confidence.
Sydney’s median house price fell 1.2 per cent to $1,265,608 in June, leading to a national decline of 0.4 per cent.
This was the biggest monthly decline in national house values since December 2022, property data company Cotality said in its monthly house price report on Wednesday.
Cotality research director Tim Lawless said the market was experiencing broad-based weakening.
Three rate hikes and increasing affordability pressures were already constraining demand for the federal budget.
He said Labour’s changes to capital gains tax and negative gearing concessions had further impacted investor confidence.
“When we talk to people on the ground, some anecdotal evidence suggests there’s already been a pretty sharp pullback in investment activity,” Mr Lawless told AAP.
“But at a time when affordability is increasing and purchasing conditions are improving, I’m not hearing much about first home buyers becoming more active. I think confidence is very low.”
But he said it was too early to tell whether this merely contributed to a cyclical downturn or represented a long-term turning point in the housing market.
Declines in housing prices and transactions are parallel to previous cycles.
So far Sydney home values are down 3.6 per cent from their peak.
Mr Lawless said housing markets had fallen by around 8.5 per cent in 2022 during the same phase of the crisis, when the Reserve Bank retreated due to rapid interest rate tightening in the wake of the Covid-19 pandemic.
He said the tax changes would likely result in less aggregate demand in the market and reduced upward pressure on prices.
“But I don’t know if this is the end of what people describe as a supercycle,” Mr. Lawless said.
Melbourne house prices fell by one per cent for the month, while Adelaide remained stable for the first time since the start of 2025.
The pace of growth in other mid-sized capital cities was significantly slower, but Brisbane still rose by 0.3 per cent and Perth by 0.7 per cent.
Mr Lawless said there was a risk of equity falling into negative for first home buyers accessing the government’s five per cent deposit guarantee scheme if prices fell further.
But he said it wouldn’t be a big problem unless the owners had to sell, which would be relatively rare given the strong labor market.
“The reality is that all these first home buyers who are buying with a five per cent deposit guarantee have been tested on whether they can repay their mortgage with a three per cent availability buffer and pretty tight considerations on their spending,” he said.
Housing Minister Clare O’Neil said the Treasury predicted the tax changes would cause house prices to grow two per cent slower, but would still rise over time.
“(The budget) levels the playing field for our nation’s first-time home buyers, which will take the 75,000 Australians who today are forced to rent the homes they deserve,” he said at question time on Tuesday.
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