One embattled industry already plagued with high rates of collapse is suffering another setback due to Labor’s tax changes.
The Albanese government’s decision to restrict negative gearing and scrap the capital gains tax discount has rattled the nation’s housing sector.
Clearance rates have plummeted and property prices have either gone backwards or slowed across all major cities.
The downturn in house prices has also spooked builders, who now have less incentive to construct new properties, the Centre for Independent Studies’ chief economist Peter Tulip noted.
“As house prices fall, builders no longer make the profits that they thought they would,” Mr Tulip told Business Weekend.
“So what was a marginal development ends up having its financing pulled and house prices are a very clear (and) strong determinant of construction in the short run.”
The recent housing stress also comes as the Reserve Bank of Australia was forced to lift the cash rate 75 basis points this year.
This completely undid the three rate cuts handed down in 2025 when inflation was falling.
Cotality data shows house prices in Sydney fell 3.2 per cent in the June quarter, while Melbourne experienced a 2.6 per cent decline and Canberra prices dropped 1.3 per cent.
More concern about the nation’s construction sector came from Housing Industry Association boss Tim Reardon.
He told News Corp that builders were seeing a pullback that was “entirely caused by the government talking”.
“Every builder in the past week, all the big guys are seeing what we are seeing,” Mr Reardon said.
“A collapse in the work coming into the pipeline. The number of contracts out is down, the number of quotes being issued is down, the number of sales is down.
“It just highlights that in making the changes to investors, they (the federal government) also undermined the confidence of owner occupiers and first-time buyers.”
The nation’s construction sector is also battling a wave of closures amid rising costs.
Creditor reporting agency Equifax shows there was a 10 per cent spike in construction businesses closing in the first quarter of 2026 compared to the same period in 2025.
Meanwhile, construction accounts for 27 per cent of all corporate insolvencies, with the sector continuing to be the largest source of business failure for the fourth year in a row.
This poses a massive threat to Labor’s goal to build 1.2 million homes in the five years to July 2029.
Housing approvals fell by 1.1 per cent in May, according to recent Australian Bureau of Statistics data, marking the third time this figure has fallen in as many months.
This spells trouble for the target as an average of 20,000 homes need to be approved every month until 2029 to reach the target.
Australia was on track to build just over 200,000 new properties in the year to May 31, but this is still below the necessary 240,000 homes per year target.
Despite the recent slump, Mr Tulip stressed the near-term setback to the housing sector from the tax changes, and recent interest rate rises, will be short-lived.
“In the longer run, we (will) see land prices adjust, profits adjust and construction seems to have no long-term relationship with house prices,” Mr Tulip added.