Albo budget ploy to overhaul capital gains tax and negative gearing is now risking a $3bn hit to Allan government’s budget.
Victoria’s state budget is facing a more than $3bn stamp duty black hole that will wipe out its surplus by the end of 2027 in the aftermath of the federal budget.
The latest blow to Spring St comes from the Real Estate Institute of Victoria’s June quarter median home price data, released today.
It reveals a $30,000 (3.1 per cent) plunge to $952,500 for Melbourne houses, and a $13,500 (2.1 per cent) tumble to $643,500 for units, in the three months to June 30.
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Regional Victoria’s values are barely holding on, with houses gaining just $1000 from March to June.
Property pundits and economists are now warning plunging home prices ahead and growing signs sales volumes will be heavily suppressed for years to come as a result of the federal budget’s changes to negative gearing and capital gains tax mean the Allan government’s estimates will come up billions short by 2028.
The REIV data is a bigger problem for the Allan government than recent algorithm-enhanced PropTrack and Cotality price declines, as the Institute’s data is only calculated from sales results and a decline in their figures will be felt in the state’s coffers.
REIV chief executive Toby Balazs is still hoping interventions into the property sector can be turned around and a better balance achieved.
They are also seeing evidence sales are concentrating in lower price brackets, with a strong prospect they are being driven by first-home buyers who would be paying no stamp duty for homes at $600,000 or less and a discounted rate up to $750,000.
The government has indicated that the 42,000 first-home buyers across the state last financial year saved more than $825m via concessions and exemptions for stamp duty.
Worse, preliminary estimates around the number of sales underpinning their figures are also on track to be as much as 10 per cent below the same time last year, meaning significantly fewer sales for the government to collect tax from.
It coincides with recent figures from PropTrack that found the number of homes being added to the market declined 11.2 per cent from April to May despite the overall number of listings remaining stable, suggesting fewer sales coming to fruition, with their economists tipping home values to fall further this year — though potentially grow again within 18 months.
REIV chief executive Toby Balazs said with both sales prices and volumes suppressed the government was facing a “significant issue with regards to their forecasts”.
“This is a situation we would like to have addressed with more favourable tax settings for property,” Mr Balazs said.
“These stats show that work needs to be done.”
Melbourne’s Median House Price Falls
| Jun-26 Quarter | Mar-26 Quarter | Quarterly Change | |
| Inner Melbourne | |||
| House | $1,601,500 | $1,635,500 | -2.10% |
| Unit and Apartment | $598,500 | $607,000 | -1.40% |
| Middle Melbourne | |||
| House | $1,135,000 | $1,188,500 | -4.50% |
| Unit and Apartment | $716,500 | $733,000 | -2.30% |
| Outer Melbourne | |||
| House | $827,500 | $836,000 | -1.00% |
| Unit and Apartment | $636,500 | $651,500 | -2.30% |
Source: REIV Quarterly Medians – June, 2026
While the REIV wasn’t prepared to suggest an exact figure, the data suggests the final take from the past financial year could be well below Victorian treasury’s $10.601bn expectations, announced on May 5 — a week before the federal budget revealed major changes to negative gearing and capital gains tax since linked to falling clearance rates and home values.
Respected property pundit and founder of SQM Research Louis Christopher is expecting worse again in the next 12 months.
“The budget’s stamp duty forecasts were out of date the day the federal changes were announced,” Mr Christopher said.
“Victoria has booked a stamp duty recovery that the federal government’s own tax changes have quietly cancelled.”
He said slipping clearance rates, which his data indicated could hint at a 20 per cent or even 30 per cent reduction in sales volumes in some areas, showed “Melbourne weakening hard”.
Mr Christopher said NSW had revised its stamp duty revenue expectations down by $5bn after the federal budget’s changes to negative gearing and capital gains tax for property investors, and that Victoria’s treasury should be checking their numbers.
SQM Research founder Louis Christopher has warned the budget could lose more than $2bn this year as a result of a collapsing Victorian property market’s lost stamp duty revenue.
The Victorian budget forecast an almost 5 per cent drop in revenue from home sales to $10.009bn in the 2027 financial year, with reduced transaction volumes factored in.
A spokesperson from the government said they were the only one on the east coast of Australia with a surplus in their budget, and that this was enabling things like a 20 per cent discount on vehicle registration.
“Only Labor has a plan to increase the housing supply and help more Victorians get into homes they can afford, in places they want to live,” the spokesperson said.
But Mr Christopher now believes the actual reduction could be as high as $1.5bn-$2.5bn depending how many sales were lost.
“Which is more than enough to wipe out the state’s projected $1bn surplus by itself,” he said.
He warned historically there would also be fewer sales in the lead up to a federal election, which will next take place in May, 2028.
AMP Capital chief economist Dr Shane Oliver said his read of the market suggested the Victorian treasury’s forecast of an almost $1bn uptick in stamp duty in the 2028 financial year was “wishful thinking”.
“In Melbourne you are probably looking at I’d say about half that, at most, as you will probably get a bit of a boost from rate cuts,” Dr Oliver said.
“But transactions are going to be somewhat suppressed from current investors, and new ones will be a bit wary through the 2028 financial year.”
AMP Capital chief economist Shane Oliver believes the Victorian budget could get half its expected $1bn stamp duty increase in 2028.
He warned Melbourne home prices still had another 4-5 per cent decline ahead of them before bottoming out in the June quarter next year, before a gradual recovery.
“But the emphasis will be on gradual,” Dr Oliver said.
The economist added that while the severity of the federal budget’s changes had not been foreseen, by the time the Victorian treasury was pulling together its budget in May they should have been anticipating some impacts from changes to investor tax settings.
“So now, not only do you have rate hikes slowing the cycle down, you also have tax changes; that’s a once in a generation change and when those things do happen they can change the whole mind set around investment in property.”
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