Speculation was rife in the lead up to this year's budget about what it would contain for housing investors. Now we know what Treasurer Jim Chalmers has planned for the capital gains tax discount, and negative gearing regime, both of which have been blamed for favouring investors over first home buyers and inflating prices. What do the changes mean for renters and potential buyers in the housing market?
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TRANSCRIPT
"So rental costs are definitely a bit crazy at the moment. Like, it's supposed to normally be about 20 or 30 percent (of income). But for a lot of people it's actually 50 percent. And then when you put groceries and bills on top of that you're really not left with much week to week."
Meet Janelle Webber, a 23-year-old renter in Brisbane talking about the pressures of finding - and keeping - a place to live.
Her experience of leasing a property in Queensland has been a common one, judging by the stories that have long flooded social media, and research that has found a sharp decline in home ownership.
In fact, the Australian Bureau of Statistics says owning a home has decreased over successive generations.
Little wonder then that the treatment of negative gearing and capital gains tax - widely blamed for driving up housing prices and worsening affordability - was the target of such fervent speculation in the leadup to the budget, and was a key plank in the budget speech itself on Tuesday from Treasurer Jim Chalmers.
"House prices have decoupled from incomes. Since 1999, house prices have risen over 400 percent, more than twice as fast as average incomes. Our tax changes will help about 75,000 Australians achieve the dream of home ownership. We’ll limit negative gearing for residential property to new builds from July next year. And we’re replacing the 50 percent capital gains tax discount with inflation-adjusted indexation, to restore the taxation of real gains. We’ll also introduce a minimum 30 percent tax rate on capital gains from July next year, and on discretionary trusts from July the year after."
Former Labor leader Bill Shorten says he feels vindicated by this budget.
He's told ABC Radio National that people will accept while Labor promised not to change these tax settings in the past, it's an idea whose time has well and truly come.
"In 2016 and 2019 we took tax reforms to the electorate, and I think that we were probably ahead of our time. And I do think this is important for the nation. So it really isn't about me or Labor. It's about how do we make sure that the housing sector is not a distortion of the tax sector, and that first homebuyers when they go and bid on houses are not competing with tax-funded investors."
The reaction from various stakeholder groups has perhaps not been surprising.
Shadow Treasurer Tim Wilson says the Opposition will not support the changes the government has proposed to negative gearing, the capital gains tax discount and discretionary trusts.
He says he isn't confident young Australians will be better off - and that the government will struggle to improve the supply of housing.
"Under their own government documents, these new taxes will lead to 35-thousand fewer homes being built across the decade. Their own documents admit that it will lead to higher rents. People who want to go buy their first home tend to rent beforehand, and they're going to be kneecapped on their journey. The higher taxes on capital gains will mean that people who invest in their deposits will get hit as well. This is an attempt to intergenerationally kneecap young Australians."
Meanwhile, the Property Council of Australia says changes to negative gearing and capital gains tax that are designed to address housing inequality, won't be effective without an influx of new homes.
The council's chief executive, Mike Zorbas, says he is sceptical about Treasurer Jim Chalmers' claim the tax reforms will help boost supply.
"They're a big roll of the dice that I hope is successful in creating new homes. But our previous modeling suggests not. Our previous modeling suggests that they will have a contractionary impact."
That's a view supported by Master Builders Australia CEO Denita Wawn, who says there are already problems in meeting existing construction targets.
"We are already falling short by 200,000. So our expectations going into this Budget was all about removing supply impediments... The government's own calculations show that we will see a decline by 35,000 homes. We'll also simply not build enough homes for people to enjoy either from a rental perspective, or an ownership perspective. And finally, we need more people: 300,000 more people. There is simply not enough in this budget to support apprenticeships and more skilled migration so we can still build for Australia."
Rents have been spiking for some time.
The Australian Bureau of Statistics says median rents in all states and territories began increasing more strongly in 2021; and continued to increase between 2021 and 2024, with the sharpest rises seen in Western Australia.
For Janelle Webber, any further spike in market rental costs would worsen an already tough situation.
"I think there definitely needs to be more focus on renters. Because we're the people who a lot of the time do need to buy these houses, and if we can't even afford week to week, how are we supposed to save for a house? And for some people, moving back in with their parents, it isn't even an option."
She says the dream of owning a home will therefore remain a distant dream.
"It's kind of a discussion that happens all around you, all the time. So it's something that everyone is thinking about, afraid of, because it's just like, just up for discussion everywhere. But for me it just seems so out of reach, especially while I'm at uni and renting. But even when I have graduated I'm thinking it's still something that's going to take a long, long time."
