We’ve previously reported on Canberra tinkering with the capital gains tax (CGT) discount, a policy many argue has helped lock investors into Australia’s property market and pushed prices higher.
At the heart of the debate is a simple question: Would cutting back that 50 % tax break actually make houses more affordable? Economists reckon the effect on prices would be modest at best – perhaps around a 1 per cent drop in values if the discount were halved and phased in carefully.
With Sydney’s median house price sitting near $1.8 million, Melbourne around $990,000, and Brisbane roughly $1.17 million, a 1 per cent fall equates to roughly $18,000 in Sydney, $9,900 in Melbourne and $11,700 in Brisbane. Sure that’s a decent chunk of money, but in terms of meaningful impact on affordability, it’s not much.
So when people ask whether the “juice is worth the squeeze” – given the political heat, complexity and potential impacts on investor behaviour and rental supply, the answer isn’t straightforward. Most experts agree that real affordability gains are more likely to come from boosting supply and streamlining planning, rather than relying on tax changes alone.
Speaking of affordability, in this week’s newsletter, we look at what the RBA is saying on the matter.
Australia’s central bank is effectively sending a clear message: if we want housing to become more affordable, we need to build more homes. The Reserve Bank of Australia (RBA) has highlighted that while interest rates grab the headlines, the deeper issue is a persistent shortage of housing supply.
Yes, rates matter. They influence borrowing power and repayment pressure. But when there simply aren’t enough homes to meet demand, prices stay elevated, regardless of whether rates rise, fall or hold steady.
The RBA’s “call to arms” is focused squarely on supply: faster approvals, smarter planning, and more diverse housing options in the areas people actually want to live.
And the borrowing numbers really bring this into perspective. For the first time, the average mortgage taken out by owner-occupiers is now above $500,000 in every single state and territory. Nationally, the average new mortgage sits at $736,000 – up almost 50 per cent in just five years. That’s a remarkable shift in a relatively short period of time, and it explains why so many households feel stretched, even if they’re earning good incomes.
In short, the affordability challenge isn’t just about the cost of money, it’s about the cost of homes. Without meaningful increases in housing supply, larger mortgages may continue to become the norm rather than the exception.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
