Labor shrugs off property tax crash fears

The federal government has dismissed warnings that its contentious property tax overhaul will crash the housing market, despite new data showing auction clearance rates have plummeted to post-pandemic lows.

Housing Minister Clare O’Neil downplayed fears of a potential 10% drop in property values resulting from changes to negative gearing and capital gains tax, arguing that interest rates remain the primary driver of market movements.

While Treasury modelling suggests dwelling prices will merely grow at a slightly slower pace, data from property research firm Cotality revealed preliminary auction clearance rates have slid to 54.5%, an indicator pointing towards an imminent metropolitan downturn.

The reforms, designed to level the playing field for young first-home buyers, come amid Reserve Bank research showing the proportion of Baby Boomer investors soared from 12% to 28% between 2000 and 2023, while home ownership among 25-to-34-year-olds fell seven percentage points over two decades.

Under the proposed budget changes, the 50% capital gains tax discount will be scrapped in favour of inflation-adjusted tracking, and negative gearing for existing properties will be phased out, though concessions remain for new builds.

While O'Neil fell short of guaranteeing overall dwelling completion targets due to external market factors, she insisted the policy would boost supply by 420,000 homes above baseline projections.

Meanwhile, Opposition Leader Angus Taylor has slammed the package as "toxic" and a war on aspiration, pledging a total repeal if the Coalition wins the next election.