For the first time in 25 years, an Australian government has implemented housing policy based on the principle that making houses more affordable requires prices to fall, according to Guardian columnist Greg Jericho. This marks a significant departure from previous approaches that focused on income growth outpacing price rises.
Policy Changes Finally Tackle Root Cause
Labor's decision to address the 50% capital gains tax (CGT) discount and negative gearing has led to actual price declines, something no government has achieved since 2000. Jericho, who is also chief economist at the Australia Institute, argues that previous attempts were inadequate given the scale of price increases.
The median house price in Sydney reached $1.56 million at the end of last year, which is $605,000 (63%) higher than in mid-2020. This rapid growth made income-based solutions ineffective, as prices needed to fall directly.
Price Falls Projected Across Major Cities
ANZ research projects that capital city prices will fall 10.6% by the end of next year, with Sydney experiencing a 14.5% decline. The projections for other cities include 12.8% in Melbourne, 7.9% in Brisbane, 9.8% in Adelaide, and 5.2% in Perth.
Using ABS median house price data, these falls would bring Sydney's median price to $1.33 million, returning to 2023 levels but still 40% higher than June 2020. Brisbane's projected fall would not erase a year's worth of increases, while Adelaide prices would remain 80% above mid-2020 levels.
Affordability Improves Significantly
Jericho notes that a 10.6% average price fall over two years is not a crash but an end to unsustainable growth. The Reserve Bank's projections indicate that dwelling prices relative to household disposable income could fall from 17.3 years in March 2025 to 14.7 years by end of 2027, marking the biggest two-year improvement in affordability since 1970.
Commonwealth Bank reported a bumper $10.9 billion profit for 2025-26, up 7%, but warned of challenges ahead. This follows three interest rate rises and the government's policy changes.
Opposition leader Angus Taylor criticized the policy, claiming it would cause the worst crash in four decades. However, Jericho dismisses the term "property recession" as made up, noting that real estate agents' profits have taken a hit but the overall impact is a modest correction.
The policy does not undo 25 years of damage but represents a significant improvement over previous efforts. Jericho suggests the government should highlight this success rather than make excuses, as showing what can be done is more impressive than explaining why it cannot.
