What Do the New Negative Gearing and CGT Changes Mean for the Property Market?

Sydney Morning Herald journalist Shane Wright examines the early market impact of Labor's newly legislated tax reforms, the largest package of its kind in a generation. The changes to negative gearing, capital gains tax and the personal income tax system passed parliament this week following a deal with the Greens, landing against a backdrop of falling auction clearance rates and softening property values in Sydney and Melbourne.

Capital City Market Conditions

The article draws on Australian Bureau of Statistics and AMP data showing the scale of the nation's property wealth, with Australian homes valued at $13 trillion and housing-related activity accounting for around 13 per cent of economic output. It notes that the time needed for an average earner to save a 20 per cent deposit has stretched from 3.5 years in 1983 to 11 years today, underscoring the affordability pressures motivating the reform debate.

Performance varies significantly by capital. Perth and Brisbane have recorded house price growth of 87 per cent and 92 per cent respectively since early 2021, while Victoria has experienced five years of real-term price declines. Auction clearance rates have fallen in recent weeks, with agents pointing to both interest rate rises and the tax changes as contributing factors.

Buyer and Market Implications

Julian Coppini, chief executive of Oliver Hume, told the Sydney Morning Herald that the tax reforms have already contributed to a 10 to 15 per cent hit to sales. He said the market was already cautious following three Reserve Bank rate hikes, and that the added restriction on self-managed super funds borrowing for residential property compounded the impact.

Coppini said the timing was particularly difficult given conditions in Victoria, which he believes is in a property recession. While he expects Perth and Brisbane to face larger corrections given recent price growth, Oliver Hume has pushed back its expected Melbourne market turnaround from late this year to late 2027.

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