Sales of new homes across Australia have declined sharply in recent months, intensifying challenges for prospective first-home buyers amid ongoing housing market pressures and recent government policy changes. The Housing Industry Association’s latest New Home Sales report indicates a roughly 20 percent drop in new home sales over the past quarter, with the most pronounced decreases occurring in Victoria, Queensland, and New South Wales.
The downturn comes despite government efforts to support first-home buyers and increase housing supply following the May federal budget. However, analysts warn that the housing market may be further constrained if interest rates continue to rise, a possibility many expect in the near term.
Critics contend that the current housing malaise is not merely a market correction. Concerns have been raised about the impact of recent tax changes introduced by the federal government, particularly the increase in capital gains tax (CGT) on share trades. These changes are said to disproportionately affect young people attempting to save for home deposits through investments in shares. According to analysis by former parliamentary budget officials and academic researchers, these individuals may now face delays of up to eight years in reaching their savings goals.
Separate modelling from Victoria University’s Centre of Policy Studies professors James Giesecke and Jason Nassios, alongside former New South Wales Parliamentary Budget Office chief economist Derek Francis, suggests that the CGT changes will extend the time needed to save for a home deposit by approximately 40 percent. Francis, who previously worked as a UBS banker, criticized the tax increases as economically misguided, arguing they diminish investment incentives and hinder economic growth, ultimately making it harder for young Australians to build wealth.
Government projections on the impact of the tax reforms have also been disputed. Treasury forecasts anticipated only modest effects on rents—about a $2-per-week increase—and predicted house prices would grow about 2 percent less than otherwise expected over the next few years. However, research completed for Australia’s four largest property and construction organizations—the Real Estate Institute of Australia, the Property Council of Australia, Master Builders Australia, and the Housing Industry Association—contradicts these forecasts. Their modelling predicts the policy changes, including the removal of negative gearing for established properties and restrictions on self-managed superannuation fund investments in housing, could reduce new housing supply by roughly 10,700 homes by 2030.
This supply shortfall is seen as compounding broader economic challenges such as inflationary pressures and constraints on wage growth. Economist Chris Richardson highlighted the need for reform in housing policy to boost productivity, stating that the nation is currently facing a significant obstacle to productivity growth due to the high cost and slow pace of new housing construction.
As these developments unfold, Labor faces decisions on whether to maintain its current course or adjust policies to address the mounting difficulties faced by first-home buyers and the broader economy. The balance between economic priorities and political considerations is likely to shape the government's approach in the coming months.