Borrowers brace for property market shake-up

Federal budget tax changes are already being felt in the housing market, with the federal government saying softer auction results show first-home buyers are gaining a fairer shot.

AAP reports national auction clearance rates held below 60 per cent for a second consecutive weekend after the budget, according to property data firm Cotality. Housing Minister Clare O’Neil said the early signs were encouraging.

“We want a level playing field between first home buyers and investors in the housing market and that’s what we’ve seen in the past two weekends,” Ms O’Neil said.

The federal budget includes plans to abolish negative gearing for established properties and replace the 50 per cent capital gains tax discount with an indexation-based system. Treasury modelling cited by AAP suggests the changes would see home prices grow two per cent slower than they otherwise would.

Morgan Stanley economists forecast home prices could fall as far as 10 per cent nationwide, driven by the tax changes and interest rate rises.

Shane Martin, Director of Shore Finance Co and a Torquay-based mortgage broker, said the budget had landed alongside another major pressure point for borrowers.

“Budget dropped in May, obviously that on top of the cash rate being increased to 4.35, we’re going to see a lot of change,” he said.

Mr Martin said the removal of capital gains tax concessions and negative gearing on existing property would likely reshape how investors viewed markets such as inner Geelong, Geelong West, Belmont and the Surf Coast.

“When we think of Geelong and the Surf Coast, how that’s going to impact people, we’re going to see two kinds of investors come out of here,” he said.

He said one group would be “set and forget” investors looking at high-growth areas with land and build opportunities.

Others, he said, would be more willing to take on projects such as subdivisions or knockdown rebuilds in established suburbs.

“That’ll be, you know, in inner Geelong, Geelong West, Belmont, these kinds of areas,” he said.

Ms O’Neil said the government’s housing changes were aimed at renters and aspiring buyers trying to save for a deposit, arguing the budget was designed for people under pressure from bills and housing costs.

“Seven million people around the country who are renting right now will end up with a fairer housing market because of what we’re doing,” she said.

The tax measures have also drawn criticism from investors, entrepreneurs and business groups, with debate continuing over their broader impact.