Treasurer Jim Chalmers has backed Treasury’s call that house prices will keep climbing over the next couple of years, even as the housing downturn deepens and major banks tip further falls.
Dr Chalmers conceded government “policy changes” were adding to the pressure, alongside higher interest rates and a softer economy, but stopped short of pinning the weakness on Labor’s negative gearing and capital gains tax overhaul.
Asked on Wednesday if falling prices worried him, Dr Chalmers urged Australians to look beyond the past few months.
Sign up to The Nightly’s newsletters.
Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.
By continuing you agree to our Terms and Privacy Policy.
“People don’t make decisions on housing from week to week. They make decisions on investing in housing over a longer period,” he said.
“And over a long period now we’ve seen house price growth, and we expect to see more modest growth over the course of the next couple of years.”
Treasury modelling released with the May Budget said Labor’s tax changes would leave house prices about 2 per cent lower after several years than they otherwise would have been, while still rising overall.
But the 2 per cent figure measures prices against a hypothetical market without the tax changes, making it difficult to apply the downturn to either to defend the reforms or blame them for the fall.
Still, prices have since gone the other way.
National home values fell 0.7 per cent in July, the biggest monthly drop since December 2022, and now sit 2 per cent below their March peak, according to Cotality.
Commonwealth Bank mortgage applications have fallen 15 per cent since May, led by a 28 per cent plunge among investors, while Westpac’s application run-rate has dropped 20 per cent from first-quarter levels.
The Reserve Bank has also acknowledged housing weakened more than it expected in May and now assumes prices will fall for a period, pointing to higher rates, tax changes and the broader economy.
Dr Chalmers said Treasury’s assumptions were never meant to be judged this quickly.
“The Treasury assumptions in the budget around house prices are assumptions for the next couple of years, not the first few months after the Budget,” he told the ABC.
Private forecasts are considerably weaker.
ANZ expects national house prices to fall 4.3 per cent this year and another 3.4 per cent in 2027, with Sydney down 14.5 per cent and Melbourne 12.8 per cent. Perth is expected to fare better, with prices tipped to fall 5.2 per cent.
NAB is tipping a 5 per cent fall across the capital cities this year before prices eke out just 1 per cent growth in 2027, while AMP expects national values to fall about 6 per cent over the 2026-27 financial year.
Commonwealth Bank chief executive Matt Comyn offered one note of caution against the gloom, saying the post-May retreat may be finding a floor.
“Housing activity has softened from a high base,” he said. “Application volumes appear to have stabilised in recent weeks.”
Reserve Bank forecasts on Tuesday suggested declining house prices would help to bring down inflation.
“Housing prices are assumed to continue to decline gradually for a period, reflecting the tightening in monetary policy earlier in the year, tax policy changes and the general economic environment,” its latest forecast said.
Governor Michele Bullock emphasised housing prices were not the “main game” for the central bank.
