Aussies who have held properties for the long haul are sitting on a mountain of cash that has smashed inflation – exposing a flaw in federal government’s current capital gains tax shakeup.
An exclusive study has exposed the jaw-dropping scale of wealth generated by the great Australian property boom over recent decades, even when factoring in the skyrocketing cost of living.
The numbers reveal that house values across the nation’s five major capital cities have surged by about four times the rate of inflation since 1980, and more than three times inflation since 1990.
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QLD suburbs with biggest capital gains since 1990
NSW suburbs with largest inflation-adjusted gains
A typical Sydney house cost $65,000 in 1980 and would have been worth $351,000 today if it had merely followed the rate of inflation, but is instead $1.55 million, according to the PropTrack study.
Treasurer Jim Chalmers explained after the Budget release that the CGT reforms were being implemented to address “intergenerational inequality”. Picture: Hilary Wardhaugh
Rises were even more extreme in Brisbane, where the median house price had been $35,000 in 1980 and would have been about $181,000 today if it had tracked inflation, but is now well over $1 million.
Melbourne house prices averaged $40,000 in 1980 and are typically about $875,000 today – roughly four times the $213,000 median they would have been if they had risen at the rate of inflation.
Real price increases were substantially higher in the country’s top growth suburbs, which tended to be in Brisbane and Perth, with values often growing at 10 times the rate of inflation.
SQM Research director Louis Christopher said the incredible gains were the result of surging economic growth in the 1980s and the 1990s, which raised the amount households could spend on housing.
“Economic growth was similar to economies like Singapore,” Mr Christopher said.
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Brisbane had the largest home value gains among major capitals when adjusted for inflation.
The scale of the windfall has exposed a flaw in the government’s latest Budget shake-up.
In May, the government announced that from mid-2027 it would scrap capital gains tax discounts introduced in 1999, replacing them with an indexation system tied to inflation.
While existing property investors will have their past gains “grandfathered” under the old rules, critics say the policy, which was sold as a fix for “intergenerational inequality”, may hurt the very people government claims they will help.
Some have argued that the changes are set to hammer Millennials and Gen Z who are trying to build a retirement nest egg, while leaving Boomers with their generous tax breaks intact.
Finch Financial director Julian Finch warned the rewrite of the tax system will lock in the generational wealth divide rather than address it.
“Under the new system, the more prices go up above inflation, the more you get taxed. Younger people pay more tax for trying to do the same thing older generations did. How is that fair?”
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Multi-millionaire Arjun Paliwal said the reforms would do little to discourage investors like himself. Picture: John Gass
REA Group economist Angus Moore said colossal, inflation-defying gains suggested the next generation of property investors may pay more tax under the recent changes.
He pointed out that when former Treasurer Peter Costello introduced the 50 per cent CGT discount in 1999, it assumed inflation would make up about half of a property’s growth. The runaway modern housing market has changed the logic.
“If we see the kind of growth as before, the new system is less generous for most property owners,” Mr Moore said, confirming future mum-and-dad investors will pay more tax in most markets.
High-profile buyer’s agent Nathan Birch, director of investment group B.Invested, didn’t hold back, labelling the policy a cash grab.
Mr Birch said the government messaging of trying to address “intergenerational equity” was a “lie”, accusing government of trying to “scam” the public.
“They are trying to rob everyone. They say they are doing this for the first-home buyer, but if that was really the case, they wouldn’t have raised CGT on all assets … it’s just a money grab.”
Aussies who bought property in the 1980s and 1990s have made huge gains, even when accounting for changes in the value of money.
FoundIt head of research Kent Lardner warned the CGT overhaul will lock most aspiring, younger mum-and-dad investors out of the market, while doing little to stop institutional corporate landlords.
Arjun Paliwal, CEO of InvestorKit and a property investor with much of his $20 million portfolio held in company structures, said wealthy investors were largely protected from the changes.
“This budget won’t touch wealthy investors like me. It will hit the middle class and young Australians trying to get ahead,” he said.
Investor Simon Loo, who owns 88 properties across Australia, said the grandfathered tax breaks mean he can keep using his equity to buy more real estate, while newcomers are left at a disadvantage.
REA Group economist Angus Moore said home price rises had far outstripped inflation because of housing shortages, strong population growth and higher borrowing capacities.
“The equity I accumulate whenever I buy these houses helps me buy the next one,” Mr Loo said.
For investors who have already secured their portfolios, Mr Loo said there was little reason to sell off their homes – and every reason to double down.
“I expect I’ll be adding more over the next 12 months,” he said. “The price of these properties over time is going to go up.”
– With additional reporting by Nicholas Finch
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