Budget warning as modelling flags housing supply risks

Independent economic modelling has raised fresh concerns that changes to property tax settings could undermine Australia’s already strained housing supply, with industry groups urging the Federal Government to prioritise policies that increase, not restrict, new home construction in the upcoming budget.

Commissioned by peak building, construction and property associations, the modelling by Qaive and Tulipwood Economics examines the impact of potential changes to Capital Gains Tax discounting and negative gearing.

GALLERY  

Across a range of scenarios, the findings consistently show that reducing access to either mechanism would lead to fewer new homes being built.

The release follows recent media speculation and the Select Committee inquiry into the Capital Gains Tax discount, which the sector argues failed to fully consider the implications for housing supply. Industry stakeholders warn that additional tax burdens on housing could further constrain development activity at a critical time.

Australia’s construction sector remains committed to the National Housing Accord target of delivering 1.2 million homes over five years. Recent initiatives such as the Housing Australia Future Fund, the National Planning Reform Blueprint and updates to the National Construction Code have been welcomed, yet the industry maintains that further taxation would work against these efforts.

Jocelyn Martin, speaking on behalf of the sector, said the modelling highlights significant economic and social risks. “Tinkering with Capital Gains Tax or negative gearing on housing will have disastrous effects for renters,” she said.

According to the modelling, removing the CGT discount with minimal grandfathering could result in 33,000 fewer homes, more than 3,000 lost construction jobs and a $3 billion decline in GDP. Eliminating negative gearing under similar conditions could see 46,000 fewer homes built, alongside a loss of over 4,300 jobs and a $2.3 billion drop in GDP.

Martin emphasised the role of private investment in delivering new supply. “Investors finance up to two in every five new homes built. Private rental investment is part of the solution to our housing crisis, not part of the problem,” she said.

With rental vacancy rates hovering just above one per cent nationally, the industry is calling for a coordinated policy approach that reduces development costs and supports construction activity. As the Federal Budget approaches, the message from the sector is clear. Policies must accelerate housing delivery, not slow it.

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