Treasurer seizes on report saying Labor's negative gearing plan would cause house price drop

Scott Morrison is surprised state governments have not been more vocal about Labor's negative gearing policy which could cost them $3.8 billion in revenue.

General view of Sold and For Sale signs outside a block of flats in Basingstoke, hampshire Source: AAP

Treasurer Scott Morrison has seized on a report that says Labor's negative gearing policy could cause home prices to fall, and eventually put upward pressure on rents.

SQM Research released on Wednesday has estimated house prices could dip three to eight per cent over three years and rents could rise in four years time if tax breaks for property investors are limited.

Mr Morrison said he was surprised state governments had not been more vocal about the potential loss of revenue.

"Labor's policy puts upward pressure on rents," he told ABC radio.

The research shows rents would remain stable initially, with growth to continue at current levels of one to two per cent nationally.

However, there may be an acceleration from 2020 because of the possible cancellations of dwelling projects.

It would take the housing market between two and four years to adjust to the policy.

SQM believes property sales turnover will fall 17-20 per cent in 2018.

This would result in a loss of state stamp duty of between $3.1 billion and $3.8 billion.

Opposition Leader Bill Shorten dismissed the report saying voters were concerned about the death of the Australian dream to own their own home.

"As soon as Labor came up with sensible reforms ... this government has ran a million miles because they would rather play politics than re-create the Australian dream of housing affordability," he told reporters in Sydney.