For years, Australians were told to work hard, save a deposit, buy a home and take responsibility for their own retirement.

Now, having followed that advice, they are being treated as the problem.

The Albanese Government’s housing strategy is not simply about helping more Australians buy a home. 

It is deliberately designed to weaken investor demand and suppress property prices  so that future purchasers can buy more cheaply. 

Treasury’s own material says the negative-gearing and capital-gains-tax changes are intended to “take pressure off” first-home buyers and increase the proportion of owner-occupiers. 

The Government has estimated that property prices will grow about 2 per cent less over the next two years than they otherwise would have. (Australian Treasury)

That may sound benign in a Canberra briefing room. It is not benign when your home is your largest asset, your retirement plan and the security underpinning your mortgage.

The market is already responding. The Australian Financial Review reports that the housing downturn is deepening, with premium property values being hit hardest. 

Cotality’s July figures show national home values falling 0.7 per cent in one month—the steepest monthly decline since December 2022. Sydney and Melbourne fell 1.4 per cent and 1.2 per cent respectively and are now more than 5 per cent below their recent peaks. PropTrack has recorded four consecutive months of national price declines. (Australian Financial Review, Reuters)

Of course, recent government policy is not the only force depressing prices. Higher interest rates, inflation, the cost-of-living crisis and global uncertainty are all doing damage. 

But that is precisely the point: why would a responsible government deliberately add another destabilising force when households are already under extraordinary pressure?

These are not paper losses for everyone

Politicians like to say that falling property prices do not matter unless an owner sells.

What a luxury it must be to believe that everyone can choose when life happens.

People sell because they lose their job. Because a marriage ends. Because illness strikes. Because a parent needs care. Because interest-rate increases make the mortgage unaffordable. Because a business fails. Because an older Australian needs to downsize and release the equity intended to fund retirement.

For those people, a fall in value is not an academic adjustment on a spreadsheet. It is real money; money they cannot afford to lose.

The greatest immediate danger is to recent buyers with very little equity. The Government encouraged first-home buyers into the market with deposits as low as 5 per cent, allowing them to borrow up to 95 per cent of the property’s value under a taxpayer-backed guarantee.

A buyer who paid $800,000 with a 5 per cent deposit started with just $40,000 in equity. A 5 per cent fall in value wipes out that entire amount before allowing for stamp duty, legal fees, selling commission and other transaction costs were they to sell.

If the property must then be sold (don’t expect the banks to sit idly by as values of assets they have funded decline), the owner may not simply lose their deposit. They may still owe the bank money after forced sale settlement.

That is negative equity and it is not a theoretical risk. Recent buyers are already reporting that their homes may be worth less than they paid. Yet Treasurer Jim Chalmers has said he is not concerned because housing is a “long-term investment”. (ABC News)

Try telling a newly separated couple, a retrenched worker or a family facing mortgage stress that they simply need to wait for the “long term”.

Yesterday’s first-home buyer is today’s collateral damage

The Government has created an extraordinarily unfair dividing line.

A person hoping to buy next year is presented as deserving of assistance. 

A person who stretched every dollar to buy last year is apparently an acceptable casualty.

Both may be young. Both may be on similar incomes. Both may have struggled for years to assemble a deposit. The only difference is timing.

One is promised a more affordable home.

The other may watch the Government celebrate while the value of the home they just purchased falls below the debt secured against it.

How is that intergenerational fairness? It is simply transferring financial pain from one group of Australians to another.

And that includes renters. Because the only buyers for existing property today are owner occupiers.  Every investment property that sells to an owner occupier means one less property available to rent, further squeezing the already limited supply of rental properties nationwide.

A home is also a retirement strategy

Not every property owner is a wealthy speculator with a harbour front portfolio.

Many Australians have spent decades paying down the family home because they do not want to rely entirely on the Age Pension. Their plan is modest and responsible: build equity, downsize later and use the difference to help fund retirement.

Others own one investment property purchased through years of work and sacrifice. They are teachers, nurses, tradespeople, small-business owners and self-employed Australians who do not enjoy generous defined-benefit pensions. Property is their superannuation supplement.

Reducing the future value of those assets reduces their ability to support themselves.

That does not eliminate the eventual cost to government. It may merely shift more retirees onto public support while shrinking the pool of private rental housing at the same time.

This is not a war between “greedy owners” and “deserving buyers”. 

Most existing owners were once first-home buyers themselves. They saved, borrowed, paid interest, maintained their properties and carried the risk of ownership. They should not be demonised or financially diminished because the Government failed over decades to address land supply, planning delays, infrastructure bottlenecks, construction costs and housing delivery.

Build affordability  

There is a fairer way to improve housing affordability: build more homes.

Release serviced land. Accelerate planning approvals. Reduce the taxes and charges embedded in new housing. Support construction capacity. Encourage small-scale infill and alternative ownership models. Direct incentives toward genuine additional supply without destabilising the value of the country’s existing housing stock.

Making one Australian poorer does not build a home for another Australian.

Nor is it compassionate to cheer falling prices while ignoring the people trapped underneath them. A healthy housing policy should create more opportunity without deliberately destroying existing household wealth.

The Government calls its reforms a rebalancing.

For owners who bought recently, who have little equity or who were counting on their property to provide dignity and independence in retirement, it may feel more like the rules were changed after they placed the biggest financial bet of their lives.

Housing affordability matters enormously. But fairness cannot mean helping those who are yet to buy by financially punishing those who already have.

That is not reform.

It is wealth destruction dressed up as (false) compassion.