Think tank credits housing tax changes with cheaper homes

What the data shows on prices, lending and rents

Cotality's national Home Value Index now sits 5.2 per cent below its March 2026 record high, the first sustained decline since the May budget altered the capital gains tax discount and negative gearing rules.^[1] The correction has spread across capital cities and regional markets in the months since those changes took effect.

Australian Bureau of Statistics lending data confirms the shift in investor behaviour. Investor loans for established dwellings fell 14 per cent in the June quarter, according to the Australian Bureau of Statistics.^[4]

The retreat from established homes has not eliminated investment activity. Owner-occupier loans for new housing rose 3.0 per cent in the June quarter, and investor loans for new builds lifted 4.2 per cent, according to the Housing Industry Association, suggesting the tax changes are redirecting capital toward construction.^[3]

Rent growth also decelerated, slowing to 0.5 per cent in the September quarter from 2.1 per cent two quarters earlier, easing pressure on tenants after years of steep increases.^[4]

What economists say about the reforms

Greg Jericho, chief economist at The Australia Institute, said the pace of change has been striking. "I think you can see even in the short time since then that it really has cracked the nut," Jericho said.^[4] The reforms reduced the capital gains tax discount available to property investors and tightened negative gearing deductions on established homes.

Economist Saul Eslake pointed to a political dimension in the government's response to the figures. Labor is "curiously reluctant to own the policy," Eslake said, despite housing data moving in the direction the government had signalled it wanted.^[4]

Negative gearing and the fifty per cent capital gains tax discount had given investors substantial incentives to buy established residential property for decades. Rising home prices outpaced wage growth by wide margins through the early 2020s, pushing many younger Australians out of ownership and into the private rental sector.

The other side: existing owners and clearance rates

Auction clearance rates have slumped since the tax changes took effect, reflecting weaker buyer demand across the established housing market.^[4] For households who bought near the March 2026 peak, the 5.2 per cent fall in values has eroded equity and complicated refinancing calculations.

The Housing Industry Association cautioned that while new-build lending is rising, policy settings still pose risks to the improving construction pipeline.^[3] ABS lending figures covering the September quarter are due to provide the next detailed read on whether the rebalancing toward new supply continues.