The national obsession with property has taken a sharp turn as home values record their third consecutive monthly decline. The downturn exposes an apparent contradiction in the federal government's housing strategy. Prime Minister Anthony Albanese argued pushing property investors out of the established market through aggressive tax changes would clear a path for hopeful first home buyers. But the clearance rates reveal a different reality.
Although ACT residents often enjoy a degree of insulation from economic shocks thanks to relatively high average incomes, the capital is not immune to this widespread downward trend. Not every local resident takes home a six-figure public service salary, and local median dwelling values have closely mirrored the broader national trajectory.
The driving forces behind the decline are rising interest rates, driven in part by persistent government spending, combined with the recent adjustments to capital gains tax and negative gearing.
The Albanese government intended its changes to empower first home buyers by removing competition from investors. Instead, the market is in retreat with auction clearance rates dropping across major capitals. Yes, investors have stepped back but first home buyers aren't picking up the slack.
Their hesitation stems from affordability constraints and a reluctance to purchase in a falling market. Nobody wants to buy a home today only to see its value drop by another 5 per cent before settlement goes through.
The moment a renter becomes a home owner their attitude towards falling property prices undergoes an abrupt 180-degree turn.
Those most at risk are the tens of thousands of young, and not so young, first home buyers who have recently purchased using the government's 5per cent deposit guarantee scheme.
Their equity is paper thin. As values slide they come closer and closer to owing the bank more than their home would sell for.
Meanwhile, the government's assumption that investors would simply pivot to commissioning new builds to retain negative gearing benefits has not come to pass. Construction approvals and home loan applications for new purchases and new builds are both trending downwards.
The government has put downward pressure on housing prices at the exact same time building materials and construction labour costs are soaring to record levels.
The result? No investor wants to commission a new build that could cost more to complete than it would fetch on the open market. They are saying "thanks, but no thanks" at the same time as builders are reluctant to break ground on a "spec home" in their own right.
This is terrible news for a government that is already falling well short of the new home building targets it set itself four years ago.
No voter caught in the fallout will let the government get away with describing the consequences as unintended. This has been ideologically-driven intervention and, so far, it is achieving the exact opposite of the PM's stated goals.
If, as cyberneticist Stafford Beer argued, "the purpose of a system is what it does" (as opposed to what its authors claim it will do), the true function of the government's heavy-handed interventions has been to disrupt the property market and place at risk the hard-earned equity of millions of Australians.
It has done this by creating a scenario where prospective first home buyers, especially those reliant on minimal deposits and large sums of other people's money, aren't willing to commit in a falling market.
This is occurring at the same time as something akin to a vendors strike with listings already down in Canberra and elsewhere. The only people prepared to test the market are those who have no choice.
