A prominent Australian economist has cautioned that Anthony Albanese’s tougher stance on property investors could help spark the sharpest national house price fall in 40 years, warning the policy shift has arrived at a particularly fragile moment for the housing market.
Leith van Onselen, an economist with MacroBusiness, said proposed changes to negative gearing and capital gains tax concessions could deepen a property slowdown already being driven by elevated interest rates, soft consumer sentiment and a lift in unemployment.
“I think we’re going to have the biggest property price correction in 40 years,” he said during an appearance on the Follio Property Podcast.
He noted that, based on Cotality figures, the largest national decline over that period was 8.2 per cent — a drop he described as relatively modest — but said he believes the coming correction could exceed it.
Van Onselen suggested lower-priced homes may prove more resilient, while expensive properties at the top end of the market could face the heaviest losses.
The Albanese government unveiled the investor tax changes as part of its broader housing affordability push, with the aim of cooling demand from property investors and giving first-home buyers a better chance of entering the market.
From July 1, 2027, investors will be unable to offset rental property losses against their salary and wage income, while a reduced capital gains tax discount is expected to make investment properties less appealing for some buyers.
Van Onselen argued the reforms may have had a stronger and less disruptive impact if introduced during a property boom, rather than as home values were already coming under pressure and Australia’s 25-year housing “super cycle” was drawing to a close.
MacroBusiness economist Leith van Onselen (pictured) predicted Australia will have the biggest property price correction in decades during an interview on the Follio Property Podcast
A leading housing economist has warned Anthony Albanese’s (pictured) crackdown on property investors could trigger Australia’s biggest house price correction in 40 years
‘The capital gains and negative gearing changes to property are very poorly timed,’ he said.
‘We’ve got a housing market that is at a cyclical peak, the RBA has just hiked rates three times, we’ve got the highest cash rate in 15 years, and financial markets think it’s going to go higher again, so we’re going to get another rate hike.
‘We’re already in a downswing, sentiment’s terrible, we’ve got the war in the Middle East, we’ve got rising unemployment now.
‘We’re probably already looking at a fairly decent property price correction nationally, and now the government’s basically put more downward momentum on that with these changes.’
Van Onselen also challenged the popular view that migration is the primary driver of house price growth, arguing easy access to credit has played a far bigger role.
But his concerns extend beyond Australia, with the economist pointing to a cautionary tale across the Tasman, where tighter restrictions on property investors were followed by a sharp housing downturn before a subsequent government unwound many of the measures.
‘They’ve had a property price crash. Now the new government’s come in and totally undone all their rules,’ he said.
‘I wouldn’t be surprised if we end up following New Zealand at some point. It could take a couple of years, but if we end up having a decent-sized correction people will get annoyed about it.’
A chronic housing shortage is limiting the depth of the housing downturn in Australia
AMP chief economist Shane Oliver also believes house prices have further to fall, though he forecasts a much more moderate decline.
National dwelling values have already fallen about 1 per cent from their peak after surging 26 per cent over the previous three years.
‘We now expect a 2 per cent fall in property prices this calendar year and a 6 per cent fall over the next 12 months,’ Mr Oliver said.
‘If unemployment rises substantially, the fall is likely to be greater.’
However, he said a chronic housing shortage would help limit the depth of any downturn.
Home building approvals remain below the Housing Accord target of 240,000 homes a year, with rising mortgage rates threatening to further slow new construction and worsen Australia’s housing supply shortage.
Despite forecasting lower house prices, van Onselen said they would ultimately improve affordability for younger Australians trying to enter the market.
The economist, who owns his home outright, said he was more concerned about the next generation’s ability to buy property than preserving paper wealth.
Economist Leith van Onselen said he was more concerned about the next generation’s ability to buy property than preserving paper wealth
‘I do care about my children’s ability to get into a home and not have to mortgage themselves to the hilt,’ he said.
‘Selfishly, I know I’m going to have to help them in.
‘You could get a good freestanding house on a good block of land for $1.5million in a nice area of Melbourne instead of $3million. Well, that’s better for me, right? I don’t have to help them as much.’
Looking ahead, van Onselen has broken with the consensus among economists, predicting unemployment will rise more sharply than the Reserve Bank expects. As a result, he believes further rate hikes may be off the table.
‘I wouldn’t be surprised if we don’t get any more rate hikes this year,’ he said.
