Housing prices are down – and that’s great for Australia

This month, economist Saul Eslake has put the government’s budget initiatives to lower housing prices in perspective... and it’s a very good thing for Australians and our economy. 

Residential property prices are falling in the capital cities, by an average of 2.5% in August according to property market data providers Cotality and Proptrack. Sydney and Melbourne have seen larger drops – 5.6% and 5.7% respectively. The major banks are predicting that capital city prices will be flat to down 5% in 2026, with larger declines of between 3% and 10% in Sydney and Melbourne, maybe more.

But where housing prices are concerned, context matters: despite recent price changes, housing values in Australia’s capital cities are still up 47.7% since the pandemic, 144% since the global financial crisis, 365% since 2000, and more than 1,000% over the past 40 years. Even a 10% correction would leave most owners comfortably ahead.

As Eslake writes in the Guardian, the government's budget changes to negative gearing and capital gains tax..."represent the most effective antidote to the problems of deteriorating housing affordability and declining access to home ownership which have been slowly metastasising in Australia for more than four decades."

These changes are difficult for any government to make given how ingrained they have become in our investment thinking but most of us know they are needed to shift property from being an investment rather than what they should be — a home for Australians.

The Ethinvest team hopes these changes will mean many more Australians are able to enter the housing market and look to invest in options other than property that can actually help build our national economy. From renewable energy infrastructure and cleantech innovation to affordable housing and new business ventures, encouraging Australian investors to diversify beyond property and bring capital to important emerging investment options could be an important step towards a stronger, more productive economic future.

Read the full article here.