The Australian housing market is currently under significant pressure, with housing values falling in major cities. Over the past three months, Melbourne and Sydney have recorded year-on-year declines of around 10 per cent and 12 per cent respectively. Nationally, housing prices fell at an annualized rate of 5.3 percent during the same period.
Contributing to these market dynamics are recent government policy decisions. The Albanian government has introduced changes including new capital gains tax rates on investment properties, a ban on negative gearing for established households, and an unusual 30 percent tax on family trusts, which will affect the investment landscape for property owners.
At the same time, the Reserve Bank of Australia (RBA) reversed previous rate cuts, raising the cash rate to 4.35% from 3.6%. This tightening was largely driven by government spending and substantial immigration, which fueled excess demand and raised the cost of living. The federal budget’s headline deficit this year is forecast to be $64 billion, which will continue to stimulate the economy.
While national values have softened, Brisbane and Perth previously saw strong appreciation, although this growth is now slowing. This pace raises concerns for first-time home buyers who may face negative equity. Despite bond markets suggesting the RBA’s hiking cycle is over, some modeling implies a further rate rise is needed, putting the best cash rate between 4.75 per cent and 5 per cent if inflation holds. The RBA’s earlier decision not to align rates with global peers in 2022-2023 is noted as a past policy mistake.
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