Australia's Housing Market Plunges After Labor's Budget Changes

Australia's housing market is on shaky ground after Labor's budget changes aimed at curbing property investors led to a sharp decline in national property values. The Reserve Bank reported that house prices have slipped 1.6% from their March peak, with Sydney down 1.4% and Melbourne 1.2%. Mortgage applications have plummeted across major lenders since the Budget, with investor applications dropping by a staggering 28%.

The changes, which restrict negative gearing to new builds and introduce a minimum 30% tax rate on real gains, are similar to those implemented in New Zealand in 2021. However, Australia's housing market is already weakened due to rising interest rates, making it even more vulnerable to the policy shift.

According to Dr. Leith van Onselen, chief economist at MacroBusiness, house prices in New Zealand have fallen by over 30% in real terms since their peak in 2021. He warns that Australia could experience a similar transformation if the present correction becomes deeper and more prolonged.