Sydney home values adjusted to inflation exposes flaw in new taxes

Aidan Devine

Updated 30 May 2026, 5:04am

First published 30 May 2026, 5:00am

Long-time homeowners are sitting on a mountain of equity that has defied rampant inflation – shattering the federal government’s core argument for its controversial capital gains tax overhaul.

An exclusive new study has revealed just how much wealth has been created by the property market over recent decades, even when adjusting home value rises for the changing value of money.

It showed Sydney house values have skyrocketed by four times the rate of inflation since 1980 and more than three times the rate of inflation since 1990.

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.

Rises were even higher in Sydney’s fastest growing suburbs, with home values growing at an incredible pace close to seven times the rate of inflation since 1990, the PropTrack data showed.

This Quakers Hill home sold in 1990 for $79,000 and resold in 2026 for $1.55m.

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This included in western suburbs Hassall Grove and Mount Annan, which had median prices of about $55,000 in 1990 that would be $140,000 today if they had tracked inflation.

Instead, prices in these areas were well over $1 million.

Home price rises against inflation were similar in areas like Quakers Hill, Putney, Dulwich Hill and Clovelly.

This relentless wealth growth has handed older property owners an unprecedented treasure trove of equity, but the sheer scale of the gains has exposed a flaw in recent Budget reforms.

Government announced in May that capital gains tax discounts introduced in 1999 would be replaced from mid-2027 with an indexation system that follows inflation.

Existing property investors will have discounts on any gains made before the deadline “grandfathered”.

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B.Invested director Nathan Birch said CGT reforms wouldn’t address intergenerational wealth imbalances.

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The changes were sold to the public as a way to address “intergenerational inequality” but critics have argued the inflation-adjusted numbers show the opposite could occur.

Some argue the changes will instead raise taxes for Millennials and Gen Z trying to build wealth for their retirement, while leaving previous generations with generous tax discounts.

Finch Financial director Julian Finch said the changes will cement wealth gaps between generations.

“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?” he said.

REA Group economist Angus Moore said the sheer scale of inflation-adjusted gains in the housing market revealed changing the system would dramatically drive up taxes for new property investors.

This Mount Annan home sold in 1990 for $53,000 and resold in 2026 for $1,031,000.

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He noted the original capital gains tax break – a 50 per cent discount on gains that was introduced by then Treasurer Peter Costello in 1999 – was built on an assumption that inflation would account for roughly half a property’s gain.

The runaway housing market since then has changed that logic, Mr Moore said, explaining that home prices had risen by many times the rate of inflation in most areas.

Closing the loophole only for new buyers means the next generation will take a hit, Mr Moore said.

“If we see the kind of growth as before, the new system is less generous for most property owners,” Mr Moore said, confirming that under the new rules, on average, future investors will pay more tax.

Buyer’s agent Nathan Birch, director of investment group B.Invested, said the government motivation for the changes didn’t add up.

“They are trying to rob everyone,” Mr Birch said. “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.”

This Hassall Grove home sold in 1990 for $117,950. It resold in 2026 for $1.16m.

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REA Group Angus Moore said home price rises had outstripped inflation because of changes in the lending sector.

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Kent Lardner, head of research at property analytics firm FoundIt, said CGT reforms would likely push out new, younger mum and dad type investors while doing nothing to curb institutional investors.

Investor Simon Loo, who owns 67 Sydney properties, said grandfathering the CGT discounts would allow him to keep buying new properties with his equity. New investors would be at a disadvantage.

“The equity I accumulate whenever I buy these houses helps me buy the next one,” Mr Loo said.

For the investors who have already accrued wealth, Mr Loo said they had no incentive to get rid of their passive income, and every incentive to buy more homes.

“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.”

HOUSE PRICE GAINS SINCE 1990 – ADJUSTED FOR INFLATION

– With additional reporting by Nicholas Finch