Home values in parts of Sydney have cratered by more than $100,000 in the months since the Albanese government announced landmark property tax reforms in the May federal budget.
Exclusive figures from PropTrack have laid bare the stunning aftermath of the changes to negative gearing and capital gains tax, with experts revealing the market has been plunged into a broadbased downturn.
The data showed median house values fell in 91 per cent of Sydney suburbs over the three months to July, while unit values fell in 69 per cent of the city suburbs with available data.
REA Group economist Anne Flaherty attributed the slump to the triple hit of budget reforms, higher interest rates and global economic turmoil linked to the Iran War, noting these forces had combined to suppress buyer demand.
“The budget reforms have structurally changed the market at a time when it was already weakening,” Ms Flaherty said.
Prices have fallen in the months since Treasurer Jim Chalmers announced the tax reforms in the May federal budget. Picture: Martin Ollman
Value falls were especially sharp at the top end of the market, with an average of more than $300,000 shaved off houses in coastal areas Cremorne, Fairlight, Curl Curl and many similar suburbs.
These areas were among more than 200 suburbs with a median property value fall greater than $100,000 and nearly 400 suburbs with a fall in house or unit values surpassing $50,000 over the three months.
MORE: ‘Cooked’: Landlords not allowed to rent out homes
PK Property buyer’s agent Peter Kelaher said investor demand had evaporated since the budget changes were announced and much of the rest of the purchaser market was also sitting out sales, fearful of overpaying.
Mr Kelaher said there was even a lack of investors buying in the new build market, where negative gearing benefits had been retained for new landlords. Government had hoped this move would push more investors to the new build market and stimulate housing suppy.
“It’s an absolute joke,” he said. “Most investors aren’t buying new stock … the investor market has almost completely gone.”
Property values have fallen by more than $100,000 in much of the market.
Loan Market broker Julian Choo said the drop off in investor demand and uncertainty over how the Albanese government’s tax reforms would impact the market had eroded confidence among home buyers.
“Everyone is an investor in a sense because if you feel like a home is going to go back in value, why would you buy it? A lot of people are simply sitting on the fence,” Mr Choo said.
Ms Flaherty said it was likely the current market downturn would be longer than previous falling cycles, such as the market dip that occurred over 2022 and early 2023 when the RBA hiked the cash rate 13 times.
“There is still so much uncertainty,” she said.
“People are trying to wrap their heads around the budget changes … they think prices will fall and they want to buy at the bottom of the cycle, so they’re waiting on the sidelines.”
Market conditions had already been weak when the negative gearing reforms were tabled due to RBA governor Michele Bullock announcing interest rate hikes. Picture: John Appleyard
Sydney areas that would be among the most vulnerable to further price falls were inner city unit markets that historically appealed to the investor market, Ms Flaherty added.
Olympic Park homeowner Hiron Li said the timing of the value falls was difficult because the cost of living was still rising so sharply and interest rate hikes were making it more difficult to hold properties.
Mr Li said he benefited by refinancing his mortgage to make his repayments cheaper and make his home ownership more sustainable.
“It probably saved me about $1000 per year,” he said. “In this financial stage, every dollar counts.”
Hiron Li recently refinanced through Loan Market broker Julian Choo. Picture: Rohan Kelly
Mr Choo said some recent first-home buyers who had accessed the Australian Government 5 per cent Deposit Scheme weren’t so lucky.
Many of these buyers had almost no equity, were often paying higher interest rates because of their higher debt, but had little scope to switch to a lender offering a cheaper rate, Mr Choo said.
“Most lenders want you to have more than 20 per cent equity to refinance,” the broker said.
– With additional reporting by Kaylee Cranley
English (US) · 