Australia Curbs Property Tax Breaks, Risks 10% House-Price Drop

2 articles · Updated · Financial Times · Jun 10

Australia’s budget reforms limit negative gearing to new developments and replace the 50% capital-gains tax discount with inflation indexation plus a 30% minimum tax rate.
Morgan Stanley says the changes could drive a 10% fall in house prices as lower expected returns and tighter borrowing capacity sharply reduce investor demand.
Early signs of cooling are already visible: Cotality said May values flatlined, with Sydney down 0.9%, Melbourne down 0.8%, and national sales volumes 2.2% below a year earlier.
Treasury estimates the tax overhaul could cut private supply by 35,000 homes over a decade, which the government says will be offset by a A$2 billion infrastructure fund backing 65,000 homes.
The reforms target a market where prices have risen 400% since 1999, but critics warn they could lift rents unless Australia fixes a broader shortage of 10 million homes for 11 million households.

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2026 Australian Property Tax Overhaul: Price Forecasts, Rent Rises, and Social Equity Challenges

Overview

In May 2026, the Australian Labor government surprised the nation by introducing major property tax reforms, breaking a key election promise and sparking intense political backlash. The reforms, effective July 2027, will end generous tax concessions for new property investments while protecting existing ones, aiming to shift investment toward new housing supply. This policy shift is expected to reduce investor demand, lower property prices, and push rents higher, especially in major cities. The changes highlight the government's urgent response to housing market challenges, but also raise concerns about social equity, market uncertainty, and the need for clear guidance during the transition.

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