Housing Minister says falling house prices due to ‘correction’, not Labor’s negative gearing and capital gains taxes

Labor has reached a deal with the Greens to scrap future negative gearing for existing builds and implement a minimum 30 per cent tax on capital gains. 

But despite these changes, which will have an impact on the housing market, Ms O’Neil said falling house prices were a correction, not a result of the tax reforms. 

The comments come amid plunging auction clearance rates and warnings that the government’s negative gearing and capital gains tax changes will weigh on values.

Speaking to ABC Radio National on Wednesday, Ms O’Neil claimed the market was undergoing a “correction” after years of growth.

“Look, I think the housing market is cyclical in Australia, a very uncontroversial comment,” Ms O’Neil said.

“We see periods of very significant house price growth, and then we see the market make a correction. And that’s what we’re seeing at the moment.”

Asked directly whether the country was in a market correction, Ms O’Neil said: “That’s correct. I don’t think that’s controversial at all.”

“We’ve just been through what has been extremely high house price growth in the period from Covid basically before Covid to today.

“House prices have gone up just in that time by more than 50 per cent. And we are seeing a correction on that.”

The government’s own modelling in the federal budget said house prices would reduce property price growth by two per cent.

However, so far, the latest data showed Sydney house prices fell by 1.1 per cent in the last month, and by 0.8 per cent in Melbourne.

Prices were still rising in Perth by 0.9 per cent, Brisbane by 0.5 per cent and Adelaide by 0.3 per cent in the last four weeks.

Property prices have been forecast to decline by up to 10 per cent due to the tax changes and rate hikes, according to Morgan Stanley’s chief economist Chris Read.

“House prices were already declining in Sydney and Melbourne before the budget, so let’s not pretend this is all to do with the taxes,” Ms O’Neil said.

The comments come after Australia’s auction market suffered its weakest conditions since the pandemic.

Data from REA Group showed national auction clearance rates plunged below 43 per cent in the week to Saturday.

The rates fell after the Reserve Bank lifted interest rates by 75 basis points since the beginning of 2026.

Labor announced its plans to roll back negative gearing and scrap the 50 per cent capital gains tax discount in the May 2026 federal budget.

REA Group analyst Benn Dorrington said the changes would put downward pressure on prices in the near term.

“We’re expecting that, in the short term, the budget’s changes will reduce national home prices by a couple of percentage points,” Mr Dorrington told Business Now.

“But over the long term, we think that it will have a modest impact on home prices.”