Chalmers Admits Tax Reforms Fueling Decline in House Prices

Treasurer Jim Chalmers has admitted that the government's tax reforms on property concessions are contributing to the decline in house prices. The June quarter national accounts showed a 0.4% expansion of the economy, with annual growth decreasing from 2.5% to 2.1%. Household spending was a major contributor to this growth, driven by a record purchase of new cars, particularly electric vehicles (EVs) and hybrids.

The surge in EV sales has continued into the current quarter, with figures showing an 91% increase in purchases compared to the same period last year. However, other areas of discretionary spending have been subdued due to rising cost-of-living pressures, with international tourism experiencing a sharp drop.

Chalmers attributed the decline in house prices to various factors, including higher interest rates and the turmoil caused by the war in Iran. He acknowledged that the budget changes on negative gearing and capital gains tax are also weighing on the market, but noted that property values were softening before the budget due to movements in interest rates.

Economists have forecasted a continued decline in property prices through 2027, with some predicting a fall of up to 13% in Sydney. The Reserve Bank of Australia (RBA) may consider an additional interest rate hike given recent inflation data indicating upside risks.